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: | Mulvey John, Rush Robert, Sweeney John |
Keywords: | forecasting: applications |
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.