Pension Fund Math: DB Obligations, Funding Ratios & Liability Hedging

What you'll build

What you will be able to do

Each lab ends with a concrete result that you build yourself and the checker confirms, cell by cell.

• Project each Halvern Plan member's final salary, cap the service at the plan maximum, work out the pension at retirement and the pension already earned today on the projected unit credit basis.
• Project the Halvern Plan's yearly benefit payments for 12 years: today's pensioners run off, new retirees join, every pension is indexed, and you chart the two groups as stacked columns.
• Discount the Halvern Plan's benefit cash flows year by year, total the present values, confirm the result with NPV and measure how much of the liability falls due in the next five years.
• Track the Halvern Plan's funding ratio and surplus or deficit over six valuations, label each year under the trustees' funding policy and stress the latest funding ratio with an equity fall.
• Measure the duration of the Halvern Plan's liability, revalue it at seven discount rates, compare the full revaluation with the duration estimate and chart the gap that convexity creates.
• Size the Halvern Plan's 2026 deficit, spread it over an 8-year recovery plan with PMT, follow the deficit down to zero in a schedule and express the total employer contribution as a share of payroll.
• Work out the expected return of the Halvern Plan's asset mix, roll the assets and the liability forward one year and find the return the assets need just to keep the funding ratio where it is.
• Measure the PV01 of the Halvern Plan's liability and of its bond and swap holdings, compute the interest-rate hedge ratio and size the extra swaps needed to reach an 80% hedge.