Economic scenario generator and parameter uncertainty : a Bayesian approach

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      <subfield code="a">Bégin, Jean-François</subfield>
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      <subfield code="a">Economic scenario generator and parameter uncertainty</subfield>
      <subfield code="b">: a Bayesian approach</subfield>
      <subfield code="c">Jean-François Bégin</subfield>
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      <subfield code="a">In this article, we study parameter uncertainty and its actuarial implications in the context of economic scenario generators. To account for this additional source of uncertainty in a consistent manner, we cast Wilkie's four-factor framework into a Bayesian model. The posterior distribution of the model parameters is estimated using Markov chain Monte Carlo methods and is used to perform Bayesian predictions on the future values of the inflation rate, the dividend yield, the dividend index return and the long-term interest rate. According to the US data, parameter uncertainty has a significant impact on the dispersion of the four economic variables of Wilkie's framework. The impact of such parameter uncertainty is then assessed for a portfolio of annuities: the right tail of the loss distribution is significantly heavier when parameters are assumed random and when this uncertainty is estimated in a consistent manner. The risk measures on the loss variable computed with parameter uncertainty are at least 12% larger than their deterministic counterparts.</subfield>
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      <subfield code="a">Teorema de Bayes</subfield>
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      <subfield code="a">Simulación Monte Carlo</subfield>
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      <subfield code="d">Belgium : ASTIN and AFIR Sections of the International Actuarial Association</subfield>
      <subfield code="x">0515-0361</subfield>
      <subfield code="g">01/05/2019 Volumen 49 Número 2 - mayo 2019 , p. 335-372</subfield>
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