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Req of a model- parameters

C

craufujy

Member
Hi

Could someone please explain to me via an example, what the difference is between the following two requirements?

1. Parameters used must allow for all those features of the business being modelled that could sig affect advice being given;
2. Inputs to parameter values should be appropriate to business being modelled and take account of the special features of company (and economic and business environment in which it is operating).

Thanks!
 
Is it not that no.1 is the types of cashflow that would affect the outcome - ie like you need to include for deaths outgo, reserving outgo...

and then that no.2 is that the assumption you make for the parameter for the cashflow must be specific to the product/target market/distribution channel - all features that make the assumption specific to the company? i.e for the deaths you have to analyse past experience and modify as you expect it to differ for your own company?
 
Yes MissBeta is right.

Think of it as....

1. What parameters do I need in my model (first of all)
2. (Then) consider what values they should actually take (allowing for past experience and expected future changes etc)
 
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