ThreeBearsBalancedWithText_2020
ContactDiscRateEnd2019ContactDiscRateEnd2019
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success_likelihood
[discount_rates_problem] [outcomes] [success_likelihood]

On the chart, to the right, there are 6 pairs of radio buttons, namely experience, contract, inflation, marginMV, assets and statistic considered.


How often will the assets at the end of the contract be sufficient? Three situations are considered, namely not enough (“Lo”), “acceptable” defined as upto 1,000 deflated too much (“OK”) or far too much (“Hi”).

Reducing the “acceptable margin” from 1,000 will increase the “Hi” region. Over Whole_2019, for a fully inflation-protected endowment fully invested in conventional bonds, the MtM approach with zero marginMV would have led to utter failure in 42% of 2,000 scenarios and to assets which are far too high in 55% of 2,000 scenarios. Increasing marginMV to 1% would have led to 50% failure and 37% far too high. In either case, only 8% of 2,000 scenarios would have been “acceptable” (see chart).