Surplus-at-risk is most accurately interpreted as being the likelihood that BC Plc might need to contribute a specified amount to the plan within the next year. True or false?
False. It’s most acurately interpreted as the Market Value of Liabilities exceeding the Market Value of Assets in the portfolio?
i think it is the same as VAR but for the surplus in an ALM
I also say false, but I copied and pasted it from 2005 CFA guided answer page 5 …
yes, it’s var on the surplus, so it wont give you a likelihood but a value
IT’s true, but I think you would get full credit if you wrote that it is the chance that the PV of your liabilities will exceed the PV of your Assets requiring the fund sponsor to make a contribution to the plan…
Horrible question. 1. I “might” need to contribute next year 100% of the time. However, I WILL have to contribute p% of the time, p<100. 2. Question presumes that surplus<0 means BC must contribute. Pension funding doesn’t always work that way. Therefore Big Babbu’s response is far more accurate than CFAI’s. 3. SAR and VAR are $amounts, not probabilities. Reminder, turn off brain on Saturday, just give them what they want…
TooOld4This Wrote: ------------------------------------------------------- > Horrible question. > > 1. I “might” need to contribute next year 100% of > the time. However, I WILL have to contribute p% of > the time, p<100. > > 2. Question presumes that surplus<0 means BC must > contribute. Pension funding doesn’t always work > that way. Therefore Big Babbu’s response is far > more accurate than CFAI’s. > > 3. SAR and VAR are $amounts, not probabilities. additonal thought: VAR is usually expressed as a % not just $amount …(the lower the confidence interval ie 1% instead of 5% or higher the expected portfolio return, the lower the VAR%)