Abstract
In this paper, we mainly focus on the valuation for the risk-based premium of private pension plan with termination provided by the Pension Benefit Guaranty Corporation (PBGC). The dynamics for assets of both the pension fund and the sponsoring company are described by jump diffusion processes. We obtain the pricing formula for the risk-based premium with premature termination and analyze the impact of certain parameters on the premium through numerical simulations. Results indicate that the risk-based premium for PBGC increases with the increase of the risky asset investment proportion, the volatility of risky asset, and pension benefits.
| Original language | English |
|---|---|
| Pages (from-to) | 1854-1869 |
| Number of pages | 16 |
| Journal | Communications in Statistics - Theory and Methods |
| Volume | 52 |
| Issue number | 6 |
| DOIs | |
| State | Published - 2023 |
Keywords
- PBGC
- jump diffusion process
- premature termination
- premium