Stochastic investment model
A stochastic investment model tries to forecast how returns and prices on different assets or asset classes, (e. g. equities or bonds) vary over time. Stochastic models are not applied for making point estimation rather interval estimation and they use different stochastic processes. Investment models can be classified into single-asset and multi-asset models. They are often used for actuarial work and financial planning to allow optimization in asset allocation or asset-liability-management (ALM).
Single-asset models
Interest rate models
Interest rate models can be used to price fixed income products. They are usually divided into one-factor models and multi-factor assets.
One-factor models
Multi-factor models
Term structure models
Stock price models
Multi-asset models
- ALM.IT (GenRe) model
- Cairns model
- FIM-Group model
- Global CAP:Link model
- Ibbotson and Sinquefield model
- Morgan Stanley model
- Russel–Yasuda Kasai model
- Smith's jump diffusion model
- TSM (B & W Deloitte) model
- Watson Wyatt model
- Whitten & Thomas model
- Wilkie investment model
- Yakoubov, Teeger & Duval model
Further reading
- Wilkie, A. D. (1984) "A stochastic investment model for actuarial use", Transactions of the Faculty of Actuaries, 39: 341-403
- Østergaard, Søren Duus (1971) "Stochastic Investment Models and Decision Criteria", The Swedish Journal of Economics, 73 (2), 157-183 JSTOR 3439055
- Sreedharan, V. P.; Wein, H. H. (1967) "A Stochastic, Multistage, Multiproduct Investment Model", SIAM Journal on Applied Mathematics, 15 (2), 347-358 JSTOR 2946287
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