[CFA L3] 2013 Morning Session Q7是否out of syllabus?

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剛剛做2013 CFA L3 Morning Session Q7, 在做part A時看著答案完全摸不著頭腦,再看教才時好像也找不到注釋,心想part A是否跟part C & D一樣也是out of syllabus?
題目如下 (題目重點已劃線,煩請大家幫忙解答):
Shire Manufacturing and Vermillion Enterprises are specialty steel fabricators based in Europe.  
Both companies provide defined benefit pension plans for their employees.  Beth Hagar, Chief
Financial Officer of Shire, is reviewing a consultant’s report that compares Shire’s and
Vermillion’s pension plans.  Both plans are large relative to each company’s total market
capitalization, have a high percentage of inactive participants, match the duration of  
fixed-income investments to the duration of pension liabilities, and are closed to new
participants.  Exhibit 1 presents selected attributes of the two pension plans.

Exhibit 1
Pension Plan Attribute                    "Shire Manufacturing"      vs       "Vermillion Enterprises"
Average age of workforce                              44                                    39
Average age of plan participants                     56                                    56
Mandatory retirement age                             65                                     65
Plan surplus                                    EUR 30,000,000                         EUR 50,000,000
Market value of plan assets                EUR 200,000,000                        EUR 500,000,000
Plan asset allocation                  60% equity, 40% fixed income       30% equity, 70% fixed income
Prior year service cost                      EUR 14,375,000                            EUR 35,000,000

A.  Describe one attribute of Vermillion’s pension plan that contributes to:
i.  lower shortfall risk relative to Shire’s pension plan.
ii.  higher shortfall risk relative to Shire’s pension plan
Ans:
Ai) Vermillion’s smaller asset/liability risk mismatch contributes to a lower shortfall risk
relative to Shire, all else equal.
Vermillion’s defined benefit pension plan has a fixed income allocation of 70% of plan
assets while Shire has an allocation of 40%.  Given that both firms match the duration of
fixed income investments with the duration of pension liabilities, the firm with the
highest allocation to fixed income in the defined benefit plan rather than equities (which
have a higher volatility of expected returns) would have the smallest asset/liability risk
mismatch (不太明白這個解釋).
Aii) Vermillion’s lower defined benefit plan surplus as a percentage of plan assets contributes
to a higher shortfall risk (不太明白這個解釋) relative to Shire, all else equal.
Vermillion has a lower relative funding surplus of EUR 50 million (10% of total plan
assets) when compared to Shire’s funding surplus of EUR 30 million (15% of plan
assets).     

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关键词：syllabus session Morning ning Abu companies employees specialty benefit provide

part B也是不太看明白, 但好像在書上有看過類似內容, 會嘗試先想想再求助大家

Shire’s pension management process has historically followed an asset-only approach.  
However, the company is considering adopting a liability-relative approach.  One of the firm’s
investment advisors recently presented three structured products to Hagar as potential pension
fund investments.  Exhibit 2 presents selected data for the three structured products.   

Exhibit 2
Structured Product                                               X                 Y 　　　　　Z
E(R)                                                                7.42%         8.44%         8.12%
s.d.                                                                 2.80%         2.36%         3.02%
Correlation of Returns with Pension Liabilities          0.92             0.22             0.51
Correlation of Returns with Pension Assets              0.35             0.75             0.12

B.  Determine which structured product Shire should add to its pension plan assets to
achieve the lowest shortfall risk if it adopts the liability-relative approach.  Justify your
response with one reason.

Ans: Structured Product X should be chosen, as it has the highest correlation (0.92) with the pension
plan liabilities.
If the company were to change from an asset-only approach to a liability-relative approach, the
key aspect of any suitable investment product would be its expected performance relative to that
of the liabilities of the pension plan.  If the returns and volatilities of investment products are
similar, a higher correlation between a product’s return and a company’s pension
liabilities implies a lower shortfall risk, and thus a higher probability of a company meeting its
pension obligations.