Early Detection of Pension-Sponsor Distress from Public Filings: A Sponsor Vulnerability Index, Stress-Augmented VaR, and Dynamic Self-Investment Caps
The Sponsor Vulnerability Index (SVI) uses public financial filings to predict pension sponsor distress one to two quarters in advance, achieving high accuracy. This index is paired with a stress-augmented Value at Risk (VaR) engine and a dynamic self-investment cap that adjusts based on the SVI, providing an early warning system for pension sponsors.