Economic Scenarios & Forecasting
Volterra has developed and implemented robust economic scenario generation techniques. Using sophisticated multivariate density estimation techniques, we can capture the joint distributions of a variety of economic variables for user selected levels of risk. Whether for Basel II purposes or for more general business strategy, our economic scenarios can provide you with consistent projections.
Volterra has implemented this technique both for financial institutions requiring Basel specific 1-in-25 year downturn scenarios, along with central estimates, and also for other companies wanting a variety of scenarios for business planning purposes. Read our report which estimated the uncertainty around the Bank of England’s forecasts for GDP growth and inflation. You can also download our new factsheet on Volterra’s approach to economic scenarios here.
Businesses, regions, cities, everyone needs to plan, and planning requires making forecasts. It is extremely difficult to achieve accuracy in long term forecasts and care needs to be taken in the choice of underlying assumptions. Unfortunately many standard models hide these underlying assumptions, creating a ‘black box’ that prevents users from sense checking and testing the robustness of their models.
We have recently produced a study on long range inflation prospects in the UK and the EU for leading financial risk consultancy Barrie and Hibbert. This analysis uses an innovative method that combines statistical analysis, historical context and expert judgement to identify different regimes of inflation experience, and establishes the likelihood of these regimes occurring in the future. The full report can be read here.
Volterra provides transparent and accountable analysis and supporting documentation. Our forecasting models allow decision makers to input different parameters and in this way consider different outcomes, along with the likelihood of the outcomes.