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Report on the Wilkie stochastic investment model

  • T. J. Geoghegan, R. S. Clarkson, K. S. Feldman, S. J. Green, A. Kitts, J. P. Lavecky, F. J. M. Ross, W. J. Smith and A. Toutounchi...

Abstract

A FIMAG Working Party was set up in 1989 to consider the stochastic investment model proposed by A. D. Wilkie, which had been used by a number of actuaries for various purposes, but had not itself been discussed at the Institute. This is the Report of that Working Party. First, the Wilkie model is described. Then the model is reviewed, and alternative types of model are discussed. Possible applications of the model are considered, and the important question of ‘actuarial judgement’ is introduced. Finally the Report looks at possible future developments. In appendices, Clarkson describes a specific alternative model for inflation, and Wilkie describes some experiments with ARCH models. In further appendices possible applications of stochastic investment models to pension funds, to life assurance and to investment management are discussed.

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This list of references on the subject of stochastic modelling is far from exhaustive. Many more references can be found in the proceedings of the 1 st and 2nd AFIR International Colloquiums (Paris 1990 and Brighton 1991) and in the financial economics literature.

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Clarkson, R. S. (1983). A market equilibrium model for the management of ordinary share portfolios. J.I.A. 110, 17.
Clarkson, R. S. (1991). A non-linear stochastic model for inflation. Proceedings of the 2nd AFIR International Colloquium, 3, 233.
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Report on the Wilkie stochastic investment model

  • T. J. Geoghegan, R. S. Clarkson, K. S. Feldman, S. J. Green, A. Kitts, J. P. Lavecky, F. J. M. Ross, W. J. Smith and A. Toutounchi...

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