R
RedCoat
Member
Hello! I think I must be misunderstanding something about stochastic models/variables in the context of CP1. It seems that in multiple places throughout the notes it is said that stochastic models with more than one stochastic variable are impractical, e.g.
Chapter 28 page 9
"the run times that result from having more than one, or possibly two, variables simulated by stochastic methods become impractical with even the most modern computing power."
Chapter 28 page 21
"As discussed in the earlier chapter on Modelling, a stochastic model with more than two stochastic variables will be impractical to run."
I work in capital modelling and it is common for our models to have multiple variables that I would consider to be stochastic, e.g. losses being drawn from distributions for multiple lines of business (distributions with fixed parameters, is that where I'm getting confused?), currency risk severities being sampled from a distribution, similar for claims inflation etc. etc. These models are pretty standard across the industry and certainly don't take long to run even without "the most modern computing power". So I feel like I must be getting confused about what the core reading is referring to, any help is much appreciated!
Chapter 28 page 9
"the run times that result from having more than one, or possibly two, variables simulated by stochastic methods become impractical with even the most modern computing power."
Chapter 28 page 21
"As discussed in the earlier chapter on Modelling, a stochastic model with more than two stochastic variables will be impractical to run."
I work in capital modelling and it is common for our models to have multiple variables that I would consider to be stochastic, e.g. losses being drawn from distributions for multiple lines of business (distributions with fixed parameters, is that where I'm getting confused?), currency risk severities being sampled from a distribution, similar for claims inflation etc. etc. These models are pretty standard across the industry and certainly don't take long to run even without "the most modern computing power". So I feel like I must be getting confused about what the core reading is referring to, any help is much appreciated!