Skip to main content Accessibility help
×
Home
Hostname: page-component-888d5979f-7wfd5 Total loading time: 0.266 Render date: 2021-10-26T06:30:34.071Z Has data issue: true Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "metricsAbstractViews": false, "figures": true, "newCiteModal": false, "newCitedByModal": true, "newEcommerce": true, "newUsageEvents": true }

Yet more on a stochastic economic model: Part 3B: stochastic bridging for retail prices and wages

Published online by Cambridge University Press:  21 November 2016

A. D. Wilkie*
Affiliation:
InQA Limited, Dennington, Ridgeway, Horsell, Woking GU21 4QR, UK
Şule Şahin
Affiliation:
Department of Actuarial Sciences, Hacettepe University, 06800 Ankara, Turkey
*
*Correspondence to: A. D. Wilkie, InQA Limited, Dennington, Ridgeway, Horsell, Woking GU21 4QR, UK. Tel. +441483 725984 or 01483 725984; E-mail: david.wilkie@inqa.com

Abstract

This is the second subpart of three in a long paper in which we consider stochastic interpolation for the Wilkie asset model, considering both Brownian bridges and Ornstein–Uhlenbeck (OU) bridges. In Part 3A, we developed certain properties for both these types of stochastic bridge, and we investigate the properties of many of our data series on the same lines. We have several economic or investment series, which all have their own peculiarities. In this paper, we cover only retail prices and wages. The other series are dealt with in Part 3C. We find that, although the annual series for the rate of inflation is generated by an AR(1) model, which is the discrete time equivalent of an OU process, an OU bridge is not suitable. We need to use a Brownian bridge on the logarithm of the Price Index. Further, the standard deviation of the monthly increments in any year is, as we find empirically from the data, a function of the change in the annual value, and further there is correlation between the monthly increments in successive years.

Type
Papers
Copyright
© Institute and Faculty of Actuaries 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Wilkie, A.D. (1986). A stochastic investment model for actuarial use. Transactions of the Faculty of Actuaries, 39, 341381.CrossRefGoogle Scholar
Wilkie, A.D. (1995). More on a stochastic asset model for actuarial use. British Actuarial Journal, 1, 777964.CrossRefGoogle Scholar
Wilkie, A.D. & Şahin, Ş. (2016). Yet more on a stochastic economic model: part 2: initial conditions, select periods and neutralising parameters. Annals of Actuarial Science, 10, 151.CrossRefGoogle Scholar
Wilkie, A.D., Şahin, Ş., Cairns, A.J.G. & Kleinow, T. (2011). Yet more on a stochastic economic model: part 1: updating and refitting, 1995 to 2009. Annals of Actuarial Science, 5, 5399.CrossRefGoogle Scholar
9
Cited by

Send article to Kindle

To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Yet more on a stochastic economic model: Part 3B: stochastic bridging for retail prices and wages
Available formats
×

Send article to Dropbox

To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

Yet more on a stochastic economic model: Part 3B: stochastic bridging for retail prices and wages
Available formats
×

Send article to Google Drive

To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

Yet more on a stochastic economic model: Part 3B: stochastic bridging for retail prices and wages
Available formats
×
×

Reply to: Submit a response

Please enter your response.

Your details

Please enter a valid email address.

Conflicting interests

Do you have any conflicting interests? *