Generating scenarios for global financial planning systems

Generating scenarios for global financial planning systems

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Article ID: iaor1999735
Country: Netherlands
Volume: 14
Issue: 2
Start Page Number: 291
End Page Number: 298
Publication Date: Apr 1998
Journal: International Journal of Forecasting
Authors: , ,
Keywords: forecasting: applications
Abstract:

Global financial planning requires representative scenarios drawn from stochastic forecasting systems such as Russell's vector autoregressive model, Wilkie's cascade approach, Towers Perrin's global CAP:Link, and the catastrophic event simulations for earthquakes and hurricanes. We discuss the role of a dynamic forecasting system in the context of asset and liability management. We also describe a quasi-random sampling procedure for maximizing the precision of recommendations derived from a dynamic decision strategy. Empirical results, for a large offshore reinsurance company over a 5 year planning horizon, show the benefits of careful scenario selection.

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