ERC Valuation

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Our concept:

  • We provide you with a simple user interface to enable you to record your scenario analysis outputs:
    • An expected loss frequency for each scenario
    • Two estimates of loss severity, and associated frequencies, for each scenario
    • An estimate of correlation between each scenario
  • We load your scenario analysis outputs into our model and for each scenario we parametrise a frequency distribution (either Poisson or Bernoulli) and severity distribution (either lognormal or pareto).
  • We employ Monte-Carlo techniques to rapidly apply these distributions to simulate 5 million losses for each scenario from which we build a corresponding loss profile.
  • We apply correlation modelling techniques (either a Gaussian or Student-t copula model) to your estimates of scenario correlations to build a combined loss profile from the individual loss profiles.
  • We model, at your required confidence level, estimates of undiversified loss on a combined and individual scenario basis and diversified loss.
  • We provide you with these model outputs for each iteration you require and on confirmation of the final iteration a detailed results document.
  • We provide you with a technical document which contains a user guide and methodology overview and provides insight tips and tweaks and bespoke options.
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