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Indexing long-term financial contracts

Published online by Cambridge University Press:  20 April 2012

A. D. Wilkie
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Extract

This paper has two functions: first, in part 1, to present briefly the results of some recent investigations into the behaviour of a price index (in the United Kingdom) in order to gain some insight into the possible future progress of inflation; secondly, in parts 2–4, to present the arguments in favour of the linking to a price index of financial instruments, in particular government stocks, life assurance contracts and pension fund benefits. Part 1 is heavily statistical, and those who prefer the controversial material can go straight to part 2, noting only the conclusion to part 1, viz.: that it is not easy to forecast inflation over any lengthy period. Parts 2–4 are controversial, and I expect will still be topical when the paper is presented. I make no pretence to be impartial; I am convinced that widespread index-linking of long-term contracts would have a beneficial effect on the conduct of our financial affairs. It is up to those who disagree with me to put their case in the discussion; but I hope my supporters will express their views too.

Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 108 , Issue 3 , December 1981 , pp. 299 - 360
Copyright
Copyright © Institute and Faculty of Actuaries 1981

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