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Measuring and Managing Federal Financial Risk$
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Deborah Lucas

Print publication date: 2010

Print ISBN-13: 9780226496580

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226496597.001.0001

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Market Valuation of Accrued Social Security Benefits

Market Valuation of Accrued Social Security Benefits

(p.213) 8 Market Valuation of Accrued Social Security Benefits
Measuring and Managing Federal Financial Risk

John Geanakoplos

Stephen P. Zeldes

University of Chicago Press

This chapter applies the principles of market valuation to Social Security obligations. The calculations are relevant, for instance, to assessing the size of unfunded federal liabilities. The chapter argues that it is important to use market value. Since claims on accrued benefits are not currently traded in financial markets, however, we cannot directly observe a market value. The chapter therefore uses a model to estimate what the market price for these claims would be if they were traded. In valuing such claims, the key issue is properly adjusting for risk.

Keywords:   market valuation, Social Security, accrued benefits, financial markets, market price, risk adjustment

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