NakedPuts2011

Liability noise:

- plan, demographic experience differently from the actuary's model given that the underlying probabilities are certain
- Model uncertainty: the underlying probability is not certain

The active employees have largest liability noise(hardest to hedge):
- Their mortality assumption is less accurate
- Their benefit payments are embedded with assumption of withdrawl, disability and retirement and are embedded with a large amount of uncertainty, much more so than those of retirees or deferreds

For retirees, liability noise include:
- mortality asumption about the length of people's lives and the duration they will receive benefits

For deferred, liability noise include:
- longevity risk
- when the participant will retire and start receiving benefits