Doorbeleggen met garanties?

We consider two extensions of a standard contract under the Dutch Wvp regulation. These contracts allow for limited investment risk after retirement. One extension is interest rate risk. The standard contract specifications assume a constant flat term structure. We introduce interest rate risk and show how interest rate shocks affect pension payments and how this risk can be partially hedged. The other extension concerns a minimum payout guarantee. The Wvp contract resembles a variable annuity with time-varying exposure to investment risk. Combining it with elements of a fixed annuity creates a lower bound on pension payments, for example at 75% of a fixed annuity. This provides a robust payoff function when risk aversion and time preference of participants in the pension scheme cannot be measured accurately

Empirical evidence on the stock-bond correlation

The correlation between stock and bond returns is a cornerstone of asset allocation decisions. History reveals abrupt regime shifts in correlation after long periods of relative stability. We investigate the drivers of the correlation between stocks and bonds and find that inflation, real rates, and government credit worthiness are important explanatory variables. We examine the implications of a shift in the stock-bond correlation and find that increases are associated with higher multi-asset portfolio risk and higher bond risk premia