Self-Sustainability
By the definition, we start with the 95th percentile of the fund at the end of the 6th year.
- Is the 6th year based on scenarios as well? That is we run simulation for a specific scenario, find the fund at the end of 6th year and then restart the simulation?
- Does deficit = 95th percentile means balance is 95% or balance is 5% (deficit 95%). For example if the balance is $1000,
do we start with $950 or $50?
Thanks!
Comments
1) That's correct. You find the 95th percentile for all scenarios and restart the simulation at the end of the 6th year.
2) When you run a simulation, you can have a range of deficits. A deficit scenario is one in which the fund balance is negative. For example, let's say we have 10 simulations with the following fund balances at the end of year 6: [5000, 4000, 3000, 2000, 1000, 0, -1000, -2000, -3000, -4000]. Then, the 95th percentile balance would be -4000, and you would restart your simulation assuming your fund balance is -4000.
So the recovery in 15 years is that including the 6 years?
For example currently its 2024, are simulation ran for 6 years to 2030. So let's say at 2030 the 95th percentile is a deficit of -5000. Is the average recovery (15 years) at 2039 (15 years from 2024) or is it at 2045 (15 years from 2030)?
It would be at 2045