Keeping Pension Plans Healthy with Stochastic Projections
For many years, stochastic modeling has been used by pension plans and endowments to obtain insight to their future financial condition. Gaining this insight can help guide investment and benefit policy decisions. However, the modeling’s deficiencies also need to be understood. These deficiencies include ignoring the worst downside trials, focusing only on a trial’s destination but not its journey, and setting the model’s underlying assumptions.