ABSTRACT
Risk sharing among stakeholders is one of the de ning character-istics of pension funds. De ned bene t (DB) plans typically include covenants ensuring that plan sponsors will compensate the pension fund in case of a funding de cit. At the same time, retirees and employees may bear some of the risk, for instance through conditional indexation, i.e., indexation
with in ation that may be forgone whenever the funding level falls below a certain threshold or whenever in ation is above a certain level.
