Abstract

http://ssrn.com/abstract=839213
 
 

References (6)



 


 



The Cost of Minimum Pension Guarantee


Tapen Sinha


Instituto Tecnológico Autónomo de México (ITAM) - Division of Actuarial Science, Statistics and Mathematics; Nottingham University Business School

Alejandro Renteria


Instituto Tecnológico Autónomo de México (ITAM) - Division of Actuarial Science, Statistics and Mathematics

October 2005


Abstract:     
We model minimum pension guarantee using a simulation approach. Lachance and Mitchell (2002) have shown that it could be important if and when individual accounts are introduced in the United States. We model ours with real data from Mexico where individual accounts are already a reality and the minimum pension guarantee is already enshrined by law. We calculate the probability of the government needing to honor the guarantee and estimate the cost of such a promise using a real options approach. Higher investment in the stock market turns out to be the key. The higher the proportion of investment allowed by law in stocks, the lower the probability of government support.

Number of Pages in PDF File: 28

Keywords: minimum pension guarantee, government liability, real options, Mexico, AFOREs

JEL Classification: G23, H55

working papers series





Download This Paper

Date posted: November 7, 2005  

Suggested Citation

Sinha, Tapen and Renteria, Alejandro, The Cost of Minimum Pension Guarantee (October 2005). Available at SSRN: http://ssrn.com/abstract=839213 or http://dx.doi.org/10.2139/ssrn.839213

Contact Information

Tapen Sinha (Contact Author)
Instituto Tecnológico Autónomo de México (ITAM) - Division of Actuarial Science, Statistics and Mathematics ( email )
Rio Hondo #1 Col. Tizapan San Angel
C.P. 01000 Del. Alvaro Obregon
52 55 5628 4088 (Phone)
52 55 5628 4086 (Fax)
Nottingham University Business School ( email )
Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom
Alejandro Renteria
Instituto Tecnológico Autónomo de México (ITAM) - Division of Actuarial Science, Statistics and Mathematics ( email )
Rio Hondo No. 1, Tizapan, San Angel
Mexico, DF 01000
Mexico
Feedback to SSRN


Paper statistics
Abstract Views: 2,283
Downloads: 393
Download Rank: 42,603
References:  6

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.281 seconds