volume 12, issue 1, P79-134 2006
DOI: 10.1017/s1357321700004712
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M. Cardinale, G. Katz, J. Kumar, J. M. Orszag

Abstract: ABSTRACTThis paper explores the effect of unhedgeable background risks such as mortality and labour risks (such as wages and turnover) on pension funding and finance. We explore the literature on the economics and finance of background risk, and discuss its applicability to pensions. Most of the results in economics apply to the special case of additive background risk, which is part of, but not all of, the background risk faced by pension funds. We develop three illustrative models and show the impact of back…

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