Real-world correlation calibration: calibration and validation of correlation targets
Document ID: 2010-1851
Published on: 28th June 2010
Author: Harry Hibbert
This note sets out our approach to calibrating the Economic Scenario Generator (ESG) such that recently updated unconditional equity to interest rate correlation targets are captured within real world projections. This is achieved by partially re-parameterising the correlation matrix that relates the shocks to the interest rate and equity models.
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