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Market Consistency and WMC [28]

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Bullet points include: Market consistency. Widely relevant across financial sector, although term itself is primarily used in insurance and particularly Solvency II. Not relevant in all circumstances, particularly when being paid to take views. Natural actuarial approach, if analytical solution is not readily available, is to estimate probability-weighted cash-flows using simulation, i.e. Monte Carlo, techniques. ‘Weighted’ Monte Carlo highlights division between model selection and calibration. Mathematically similar to some Bayesian techniques used in machine learning

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