Stochastic investment model
A stochastic investment model tries to forecast how returns and prices on different assets or asset classes, vary over time. Stochastic models are not applied for making point estimation rather interval estimation and they use different stochastic processes. Investment models can be classified into single-asset and multi-asset models. They are often used for actuarial work and financial planning to allow optimization in asset allocation or asset-liability-management (ALM).
Single-asset models
Interest rate models
Interest rate models can be used to price fixed income products. They are usually divided into one-factor models and multi-factor assets.One-factor models
- Black–Derman–Toy model
- Black–Karasinski model
- Cox–Ingersoll–Ross model
- Ho–Lee model
- Hull–White model
- Kalotay–Williams–Fabozzi model
- Merton model
- Rendleman–Bartter model
- Vasicek model
Multi-factor models
Term structure models
Stock price models
Multi-asset models
- ALM.IT model
- Cairns model
- FIM-Group model
- Global CAP:Link model
- Ibbotson and Sinquefield model
- Morgan Stanley model
- Russel–Yasuda Kasai model
- Smith's jump diffusion model
- TSM model
- Watson Wyatt model
- Whitten & Thomas model
- Wilkie investment model
- Yakoubov, Teeger & Duval model