aidebaobao

I think this is important for the pension on balance sheet questions. I get the balance sheet and how both sides have to equal, but it's sort of an algebra exercise whereby I was unsure which one is fixed and which one varies (between OA beta and Eq beta).

You seem to be saying the equity beta would increase such that it falls back to an unchanged OA beta. i.e. lower equity weight, higher equity beta, unchanged overall beta.

Is this always the case when you lever up? Would it ever be that the overall beta declines with less equity?

What about when you add pension liabilities and assets, thereby decreasing the weight of equity on the liability side of the balance sheet. Does this decrease overall beta, or does the equity beta increase to offset the decreased weight (sort of like the levering)?