Unfunded pension liabilities and sponsoring firm credit risk: an international analysis of corporate bond spreads

This paper tests empirically whether pension information derived by corporate pension accounting disclosures is priced in corporate bond spreads. The model represents a hybrid of more traditional accounting ratio-based models of credit risk and structural models of bond spreads initiated by Merton (1974). The model is fitted to 5 years of data from 2002 to 2006 featuring companies from the US and Europe. The paper finds that while unfunded pension liabilities are priced in the overall sample, they are not priced as aggressively as traditional leverage. Furthermore, an extended model shows that the pension–credit risk relation is most evident in the US and Germany, where unfunded pension liabilities are priced more aggressively than traditional forms of leverage. No pension–credit risk relation is found in the other countries sampled, notably the UK, Netherlands and France.

Contingent screening for down syndrome is an efficient alternative to non-disclosure sequential screening

Objective To present a first and second trimester Down syndrome screening strategy, whereby second-trimester marker determination is contingent on the first-trimester results. Unlike non-disclosure sequential screening (the Integrated test), which requires all women to have markers in both trimesters, this allows a large proportion of the women to complete screening in the first trimester. Methods Two first-trimester risk cut-offs defined three types of results: positive and referred for early diagnosis; negative with screening complete; and intermediate, needing second-trimester markers. Multivariate Gaussian modelling with Monte Carlo simulation was used to estimate the false-positive rate for a fixed 85% detection rate. The false-positive rate was evaluated for various early detection rates and early test completion rates. Model parameters were taken from the SURUSS trial. Results Completion of screening in the first trimester for 75% of women resulted in a 30% early detection rate and a 55% second trimester detected rate (net 85%) with a false-positive rate only 0.1% above that achievable by the Integrated test. The screen-positive rate was 0.1% in the first trimester and 4.7% for those continuing to be tested in the second trimester. If the early detection rate were to be increased to 45% or the early completion rate were to be increased to 80%, there would be a further 0.1% increase in the false-positive rate. Conclusion Contingent screening can achieve results comparable with the Integrated test but with earlier completion of screening for most women. Both strategies need to be evaluated in large-scale prospective studies particularly in relation to psychological impact and practicability.

Three-stage contingent screening for down syndrome

Objective To demonstrate the potential value of three-stage sequential screening for Down syndrome. Methods Protocols were considered in which maternal serum pregnancy associated plasma protein-A (PAPP-A) and free -human chorionic gonadotropin (hCG) measurements were taken on all women in the first trimester. Those women with very low Down syndrome risks were screened negative at that stage and nuchal translucency (NT) was measured on the remainder and the risk reassessed. Those with very low risk were then screened negative and those with very high risk were offered early diagnostic testing. Those with intermediate risks received second-trimester maternal serum -fetoprotein, free -hCG, unconjugated estriol and inhibin-A. Risk was then reassessed and those with high risk were offered diagnosis. Detection rates and false-positive rates were estimated by multivariate Gaussian modelling using Monte-Carlo simulation. Results The modelling suggests that, with full adherence to a three-stage policy, overall detection rates of nearly 90% and false-positive rates below 2.0% can be achieved. Approximately two-thirds of pregnancies are screened on the basis of first-trimester biochemistry alone, five out of six women complete their screening in the first trimester, and the first-trimester detection rate is over 60%. Conclusion Three-stage contingent sequential screening is potentially highly effective for Down syndrome screening. The acceptability of this protocol and its performance in practice, should be tested in prospective studies. Copyright © 2006 John Wiley & Sons, Ltd.