Random Number Generation in the ESG
Document ID: 2010-1829
Published on: 10th May 2010
Author: John Heap
The ESG is most commonly used to either value complex insurance liabilities or to help calculate the probability of a user remaining solvent over a given time period, using Monte Carlo principles in each case. For both of these applications a large number of “random” economic scenarios are generated and their distributions analysed to aid in these calculations. Obviously then the building blocks of these random scenarios- (pseudo) random numbers - are fundamentally important, and in this note we clarify how the generation of these numbers is initialised.
