Is this real life? is this just fantasy? Making real world scenarios real

We are delighted to have Andrew Smith (Deloitte) join us to share his talk from this year's GIRO conference.

Financial firms now make widespread use of stochastic models for diverse and business critical purposes including risk, capital management, liability valuation, pricing and investment strategy. Given the models are widely relied upon, firms increasingly need to satisfy themselves that their stochastic models are fit for purpose. To do this it is necessary to understand the choices made in building a stochastic model and in what circumstances the chosen parameters may not be appropriate. This session will describe methods of testing stochastic models, and what those tests can tell us about a models’ strengths and weaknesses. In particular, the session will cover:

• Common areas in which stochastic models fall short;
• The suite of tests that you should consider to ensure that your model is fit for purpose;
• Challenges in testing stochastic models;
• What constitutes a good stochastic model? 

Download the Andrew's slide presentation from GIRO