PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

MODELING FINANCIAL SCENARIOS 209TABLE 1Key Variables from Financial Scenario Model RunDate 7/17/2004Iterations 5,000Parameters BaseNominal Interest Rates Not Allowed to Be NegativeMean Range at Year 10 (25)First Year (16) Last (30) 1% 99%Output Interest RatesReal Interest Rates1-month (B) 0.009 0.030 ¡0:053 0.1001-year (D) 0.009 0.029 ¡0:051 0.09710-year (G) 0.011 0.026 ¡0:033 0.076Inflation Rate1-month (J) 0.023 0.048 ¡0:053 0.1451-year (L) 0.027 0.048 ¡0:037 0.12910-year (O) 0.039 0.045 0.020 0.069Nominal Interest Rates1-month (R) 0.032 0.078 0.000 0.1941-year (T) 0.036 0.077 0.000 0.18310-year (W) 0.051 0.071 0.006 0.127Other OutputLarge Stocks (B) 0.087 0.116 ¡0:159 0.296Small Stocks (C) 0.134 0.136 ¡0:159 0.397Dividend Yield (D) 0.015 0.023 0.006 0.039Unemployment (E) 0.060 0.061 0.035 0.087Real Estate (F) 0.081 0.094 0.030 0.161The letters in the first column indicate the columns, and the numbers in the headings indicate therows, of the cells where the values are located in the @RISK output files.ticular variable at one point in time (a single projection year).For comparative purposes, the distribution of historical values,where appropriate, is also plotted in these histograms.Real Interest RatesWe start by looking at the one-month real interest rate in Table1. The mean value for the first projection month is 0%. Bythe end of the 50-year projection period, this value has moved