canadiananalyst

NeverUse, I am not sure you are correct with respect to the levering up the balance sheet based on the asset allocation of the pension plan.

The firm "levers up" the balance sheet if the pension is running at a deficit (underfunded), which increases pension liability, while maintaining pension assets the same (so firm equity decreases).

The difference in debt vs equity used in the pension assets only affects the pension asset beta.

canadiananalyst

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Edited 1 time(s). Last edit at Sunday, May 30, 2010 at 03:34PM by pupdawg82.