Finance Department

 

Date of this Version

2006

Document Type

Article

Citation

Journal of Actuarial Practice 13 (2006) pp. 119-126

Comments

Copyright 2006 Absalom Press

Abstract

We compare the unit credit and the unprojected individual level premium cost methods in a continuous time environment and show that the latter may produce unstable contribution rates in a dynamic environment. Specifically, assuming there are no unfunded liabilities, we prove that the unprojected individual premium cost method may produce non-bounded contributions if benefits change too close to the normal retirement age.

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