Resampling a time‐series process: A method of estimating the probabilities associated with alternative plans for protecting pensions against inflation

AbstractAny pension protection formula that falls short of complete compensation for inflation has associated with it a time‐series of probability distributions of future purchasing power losses. A method of estimating those distributions is proposed and applied. The method is based on the idea of representing inflation as a multivariate time‐series process and using a model fitted to historical data to generate a large artificial sample of ‘realized’ inflation sequences by means of a bootstrapping procedure. The purchasing power losses under a given protection plan can then be simulated for each inflation sequence and the sample distributions calculated.

Resampling a time‐series process: A method of estimating the probabilities associated with alternative plans for protecting pensions against inflation Journal Articles