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Report on the Wilkie stochastic investment model

Author:
Geoghegan, T J; Clarkson, R S; Feldman, K S; Green, S J; Kitts, A; Lavecky, J P; Ross, F J M; Smith, W J; Toutounchi, A
Source:
Journal of the Institute of Actuaries [JIA] (1992) 119: 173-228
Publication date:
27 January 1992
File:
PDF 3.7 MB
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Document description

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.