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Duration

R

Rahul-Ahuja

Member
How is duration used to determine valuation discount rate in retirement benefit schemes?
 
Hi!

Let's suppose that you are going to use a single discount rate for your valuation and that you want to base it on the yield of a bond.

You might assess the duration of the pension scheme's liabilities and then base your discount rate on the yield of a bond of a similar duration (on the grounds that this bond would probably be a better match for your liabilities than a bond of longer or shorter duration).

Best wishes

Gresham
 
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