Barrie & Hibbert Knowledge Base

Real-world equity calibration - Distributional targets at end December 2015

2016-01-08T12:36:34Z

This note provides an update to our real-world volatility, correlation and risk premium assumptions for global equity markets at end December 2015. In our view, the assumptions presented here provide a set of feasible real-world calibration targets. Please note that these targets may not be precisely matched by specific model calibrations. In general, models offer fewer degrees of freedom than the number of targets documented here. As a result, the actual choice of the calibration targets used in the fitting process is described in the model calibration documentation.

Financial Market Update 2015

2016-01-07T13:39:42Z

Despite asset price volatility through the year and some notable policy shifts from major central banks, conditions across financial markets at the end of 2015 are remarkably unchanged compared to end 2014. Central banks dominated headlines at both the beginning and end of the year. In January the ECB embarked on a quantitative easing programme which is now set to last until at least March 2017 and the Swiss National Bank abandoned its currency peg. In December the Federal Reserve ended an historic era of monetary policy by raising interest rates for the first time since 2006. Volatility across equity markets (which spiked in August) has been driven predominantly by concerns over prospects in emerging markets, most significantly China. Oil has had another highly volatile year and hit its lowest level in more than a decade in December. Positive fundamental data from the US and UK combined with an encouraging economic performance in some regions of the Eurozone mean that the current economic outlook is promising, though notable risks remain as prospects for emerging markets are uncertain and there is potential for policy miss-steps in developed economies.

End December 2015 Pre-Calibration Note

2015-11-24T13:22:32Z

This note sets out the planned delivery schedule for our end December 2015 ESG calibrations and provides details of various updates to our standard calibration services.

End September 2015 - Data Validation, Quality Assurance and Compliance Report

2015-11-12T16:20:14Z

This document contains the details of our Validation and QA processes and a detailed "check-list" on the most recent end quarter calibration cycle for all the standard economies and models delivered for the Real World (Multi-Year) and Market Consistent calibrations. Included in this are the details on the sign-off for all the models and tools (including sign-off on underlying market data, calibration tool outputs and consistency checks across the tools).

Data Policy and Standards for ESG Calibrations - September 2015

2015-11-12T16:11:45Z

The data policy selection statements described in this note are based on external economic and financial market data sources used by B&H. All external market data used with ESG calibrations is publicly available (subject to appropriate commercial data licence agreements) from industry recognised market data vendors.

Webinar recording: Get the most from the new ESG 8.3

2015-10-29T16:06:11Z

Recording of the Moody’s Anlaytics webinar for release of version 8.3 of the Economic Scenario Generator software. The two themes of this release are enhancements to our real world modeling, and usability. The model extensions provide more control over the distributions of risk factors, and the usability enhancements make both setup and calibration easier.

Real-world equity calibration - Distributional targets at end September 2015

2015-10-07T10:12:06Z

This note provides an update to our real-world volatility, correlation and risk premium assumptions for global equity markets at end September 2015. In our view, the assumptions presented here provide a set of feasible real-world calibration targets. Please note that these targets may not be precisely matched by specific model calibrations. In general, models offer fewer degrees of freedom than the number of targets documented here. As a result, the actual choice of the calibration targets used in the fitting process is described in the model calibration documentation.

Recording of end September 2015 Pre-Calibration Webinar

2015-09-03T11:44:29Z

Recording of the Moody’s Analytics webinar about the approaches adopted and the production schedule for the end September 2015 calibrations.

Solvency II Calibrations - LMM+ Calibrations for EIOPA Yield Curves

2015-08-28T13:33:19Z

In this note we outline the method used to produce market-consistent calibrations for the LMM+ model for Solvency II applications. Solvency II legislation requires the use of yield curves built using a method specified by EIOPA. These yield curves differ from standard swap curves in a number of ways - there are a range of adjustments which are necessary for the liquid portion of the curve and yields are extrapolated for longer maturities to an unconditional forward rate.

Given the differences between EIOPA and standard swap curves, consideration needs to be made regarding appropriate volatilities for use in the calibration. Our approach is to use absolute/normal option implied swaption volatilities, rather than Black (lognormal) implied volatilities. Absolute/normal implied volatilities are much less dependent on both the level of at-the-money swap rates and the strike of swaptions than lognormal volatilities. There is therefore less need to change these volatilities in response to the adjustments made when building the EIOPA curves.

EndMar2015 Backdated MC Solvency II Calibrations

2015-08-28T12:23:30Z

This location provides a link to backdated End March 2015 MC Solvency II LMM+ calibrations and associated documentation for the GBP, EUR, USD, JPY, CAD, NOK and CZK economies.

Calibration Tools Methodology Guide

2015-08-27T14:34:48Z

This document covers the core methodology used in the client calibration tools for all of the models used in the following tools: (1)Yield Curve Builder, (2) Swaptions Calibration Tool and (3) The Real World Extended 2 Factor Black Karasinski Tool.

End September 2015 Pre-Calibration Note

2015-08-21T09:33:12Z

This note sets out the planned delivery schedule for our end September 2015 ESG calibrations and provides details of various updates to our standard calibration services.

Macroeconomic Variables Assumptions and Calibration Update 2015

2015-08-14T14:06:21Z

This note provides our latest assumptions for the long term distribution characteristics of the real GDP and real wage growth along with calibrated parameters of the related wedge models. These models are not included in our standard calibration files and can be configured by users according to the assumptions presented in this note.

Real-World One-Year LMM Plus Calibration Update 2015

2015-08-13T12:35:14Z

This note details updates to the semi-static LMM Plus Real-World One-Year calibration parameters. This includes an update to our broad assumption for displacement as well as re-validation of the two and three factor LMM calibrations to key correlation assumptions

Correlation Calibration Update 2015

2015-08-11T14:40:25Z

The Economic Scenario Generator is a collection of stochastic models of a range of financial and economic variables. One method of linking the models together is through specification of the correlations between the randomly generated shocks that drive the evolution of the stochastic processes. Through specifying the correlations between these shocks we can ensure that realistic joint risk driver behaviour can be generated in ESG simulation. This note details re-estimated parameters reflecting the latest updates to our core correlation assumptions.