Viewing entries tagged with 'Embedded Options'

Valuation of Embedded Options (Guarantees) in Pensions Funds and Cash Balances Plans

Posted by Fairmat Srl

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A cash balance plan is a defined benefit plan that provides a participant with a periodic pay credit (commonly linked to salary and wages and usually tied to age and/or experience) and prescribes an interest crediting rate (usually tied to a constant maturity bond or a Consumer Price Index) that defines how the accumulation of pay credits will evolve over time. The benefit under the cash balance plan is expressed as a lump sum, known as the cash balance “account” or “current account balance” From [1].

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