Market Consistency and WMC [22]

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Bullet points include: Locate the prices of relevant market observables. E.g. prices of zero coupon bonds and of options sensitive to relevant implied volatilities. Prepare lots of simulations in a way that calibrates to these prices and adheres to other requirements needed for model to be consistent with financial economics principles: E.g. need for series to be martingales (loosely speaking the so-called 1 = 1 requirement, that e.g. the present value of future cash flows arising from an investment of 1 in equities now needs to be 1). Project liabilities using these simulations. Report on results, including demonstrations that model is adequately market consistent

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