what should albert henry do to avoid widening the pension fund gap 468444
Albert Henri is the fixed-income manager of a large Canadian pension fund. The present value of the pension fund’s portfolio of assets is CAD 4 billion while the expected present value of the fund’s liabilities is CAD 5 billion. The respective modified durations are 8.254 and 6.825 years. The fund currently has an actuarial deficit (assets
The most liquid interest rate futures contract has a present value of CAD 68,336 and a duration of 2.1468 years. Analyzing both scenarios separately, what should Albert Henry do to avoid widening the pension fund gap? Choose the best option.
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First Scenario Second Scenario
A. Do nothing. Buy 7,559 contracts.
B. Do nothing. Sell 7,559 contracts.
C. Buy 7,559 contracts. Do nothing.
D. Do nothing. Do nothing.
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