Review of Financial Studies 2026

Pension Liquidity Risk

Kristy A. E. Jansen¹; Sven Klingler²; Angelo Ranaldo³; Patty Duijm⁴

¹ University of Southern California, CEPR, and De Nederlandsche Bank Marshall School of Business, , USA and · ² Frankfurt School of Finance and Management · ³ University of Basel and Swiss Finance Institute · ⁴ De Nederlandsche Bank

Abstract

Pension funds use interest rate swaps to hedge the interest rate risk arising from their liabilities. Analyzing regulatory data on Dutch pension funds, we show that pension funds with worse funding ratios, indicating greater fragility, use swaps more aggressively. These swap positions expose pension funds to the risk of margin calls, which can exceed 6% of their total assets, when interest rates rise. Pension funds respond to realized margin calls by selling safe government bonds with medium-term maturities. This procyclical selling behavior adversely affects the prices of the sold bonds and thereby exposes pension funds to market liquidity risk.

DOI

10.1093/rfs/hhag068

Language

en

Sources

crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓