Portability vs Asset Price and Contribution Risk: A Continuous-Time Expected Utility Comparisons of DB and DC Pension Plans

25 Pages Posted: 19 Oct 2012 Last revised: 27 Feb 2013

See all articles by An Chen

An Chen

University of Ulm

Filip Uzelac

University of Bonn - The Bonn Graduate School of Economics

Date Written: October 17, 2012

Abstract

This paper compares two diff erent types of private retirement plans from the perspective of a representative benefi ciary: De fined Benefi t (DB) and Defi ned Contribution (DC) plan. One of the key di fferences is that DB plans carry portability risks, whereas DC plans bear asset and contribution risk. We model these diff erences explicitly in this paper and compare these two plans in a utility based framework. Our numerical analysis focuses on determining the critical job switching intensity which makes the bene ficiary indi fferent between the DB and DC plan.

Keywords: defined benefit plan, defined contribution plan, portability risk, asset price & contribution risk

JEL Classification: G13, G23

Suggested Citation

Chen, An and Uzelac, Filip, Portability vs Asset Price and Contribution Risk: A Continuous-Time Expected Utility Comparisons of DB and DC Pension Plans (October 17, 2012). Available at SSRN: https://ssrn.com/abstract=2162961 or http://dx.doi.org/10.2139/ssrn.2162961

An Chen

University of Ulm ( email )

Helmholtzstrasse 20
Ulm, D-89081
Germany

HOME PAGE: http://www.uni-ulm.de/mawi/ivw/team

Filip Uzelac (Contact Author)

University of Bonn - The Bonn Graduate School of Economics ( email )

Adenauerallee 24-26
Bonn, D-53113
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
83
Abstract Views
623
rank
353,917
PlumX Metrics