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Plan-Wide Risk
Jan 1, 1997
Several issues arise when analyzing plan-wide risk. What is the appropriate plan benchmark? Dies it consist of a set of investable indices? How does it reflect the liabilities that are the true underlying target for the plan? More general still, how should we define risk? Should we use value at risk or standard deviation? Should we define risk relative to the benchmark? Even after choosing a particular risk definition, we must identify all the factors which drive risk. Finally, should our forecast of risk use simply historical returns data or specifically analyze the current plan holdings? In this paper we will discuss these issues and provide for concreteness a detailed case study.