The fair valuation of defined contribution pension funds in a stochastic mortality environment

This paper analyses the role of the term structure of interest and mortality rates for Defined Contribution Pension Schemes. In particular, the model suggested allows the actuary to determine the fair valuation of such a scheme by modelling both mortality and financial risk by means of diffusion processes. A numerical example illustrates the fair value accounting impact on reserve evaluations by comparing a traditional deterministic approach and a stochastic one for interest and mortality rates.