Creating portfolio risk and return models [27]

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Bullet points include: In actuarial-speak, means creation of scenarios for how future economic factors might evolve that approximate to all possible future scenarios Can be applied to: Interest rates (e.g. Heath-Jarrow-Morton aka HJM/BGM) Currencies Equities (might use Black-Scholes or more complex variants, e.g. local volatility) Property (more challenging given difficulty in identifying fair volatility) Hybrid exposures Inflation …

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