Market Valuation of Accrued Social Security Benefits

John Geanakoplos and Stephen P. Zeldes

in Measuring and Managing Federal Financial Risk

Published by University of Chicago Press

Published in print April 2010 | ISBN: 9780226496580
Published online February 2013 | e-ISBN: 9780226496597 | DOI:
Market Valuation of Accrued Social Security Benefits

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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

Chapter.  8653 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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