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The Treatment of Assets in Pension Funding

Published online by Cambridge University Press:  17 April 2015

M. Iqbal Owadally  and
Steven Haberman
M. Iqbal Owadally
Affiliation:
Faculty of Actuarial Science and Statistics, Cass Business School, City University, 106 Bunhill Row, London EC1Y 8TZ, England. E-mail: iqbal@city.ac.uk
Steven Haberman
Affiliation:
Faculty of Actuarial Science and Statistics, Cass Business School, City University, 106 Bunhill Row, London EC1Y 8TZ, England. E-mail: iqbal@city.ac.uk
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Abstract

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A recent survey of actuarial practitioners in North America shows that smoothed-market actuarial asset values are commonly used in funding valuations of defined benefit pension plans. Four methods of calculating such values are reported in the actuarial literature but only qualitative descriptions of the methods are given. This paper provides mathematical descriptions of the “average of market”, “weighted average”, “deferred recognition” and “write-up” actuarial values. They are shown to be based on either arithmetic or exponential smoothing. Provided the same form of smoothing is used, the four methods are equivalent.

Keywords

Actuarial valuationassetslossessmoothing

Information

Type
Workshop
Information
ASTIN Bulletin: The Journal of the IAA , Volume 34 , Issue 2 , November 2004 , pp. 425 - 433
Copyright
Copyright © ASTIN Bulletin 2004

References

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