Forward simulation

We know that uncertainty is one of our clients’ major issues, leading us to incorporate an innovative forward-looking feature into our software.

Run a simulation of future values at certain dates and study the evolution of the contract according to a set of forward-looking scenarios.

Specify a set of scenarios and a set of increasing dates for the valuation that you want. The scenarios will describe how your market data, used for managing and/or pricing the contract, will evolve in the future. Market data that do not appear in the scenario stay constant and are shifted along the simulation timeline.

For each scenario and each valuation date, the contract is managed to obtain the residual contract, which is then priced in the market situation (obtained by applying the scenario).

Once the simulation has been computed and results have been generated, an elaborated and unequaled post-processing task can be performed on the data. Take advantage of the seven components of this post-processing functionality of Forward Simulation:

  • Summary

  • Cash flows

  • Underlying on horizons and contracts

  • Unused perturbations

  • Residual value by horizon date

  • Annual yield distribution

  • Life in years distribution

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Figure 1: Details of future cash flows including residual prices, annual yield and remaining life of the contract

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Figure 2: Chart of the residual value by horizon

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Figure 3: Chart of the annual yield distribution

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Figure 4: Chart of the life in years distribution

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