Stochastic simulations

We generate and provide you with sets of simulation on a wide universe of asset classes. You can use this data in the context of our simulators, or as a feed for your own tools.

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To look forward

Although commonly used, back-tests only provide partial information when it comes to studying a strategy or quantifying the benefits / risks of an asset allocation. It is necessary to supplement this analysis with a prospective study, which takes into account the great diversity of scenarios the future could be made of.

At Active Asset Allocation, we look forward and use a prospective universe to analyze your portfolio. For each of your assets, we generate 1,000 stochastic scenarios using the FHS method and then test your portfolio on it to obtain statistically significant results.

The FHS methodology

The Filtered Historical Simulations (FHS) method aims to combine the advantages of the Historical Simulations method and appropriate volatility modeling.

This methodology has many advantages for financial institutions, since it takes into account the dynamic correlation that exists between asset classes, it does not require any assumption on the distribution of returns, nor about their correlation and it produces more stressed scenarios than those observed in the past. To find out more, we recommend that you read our Risk-Letter.

The key points of this method

Complete method

Combines several methodologies for optimal results.

Proven

Introduced in 1998, this method and its benefits have been proven.

Risk Assessment

As it allows to generate more unfavorable scenarios than observed in the past, it is fit for stress-testing.

Learn more about our stochastic simulations

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What asset classes are covered?
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How can I use the simulations?
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Can I incorporate my long-term performance projections into it?
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How far can the simulations go?
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What is the granularity of the simulations?

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