Real world inflation modelling: United States medical cost inflation
Document ID: 2009-1599 (previously 2009/17)
Published on: 13th November 2009
Author: Harry Hibbert & Steffen Sorensen
Specific inflation rates are a concern for any institution with liabilities linked to prices in a particular region or sector. Aggregated price indices can only ever proxy the inflation rates relevant to individual firms, which means that risk management can be improved by calibrating models to inflation indices that better represent the inflation rate relevant to liabilities faced by a firm.
This note presents calibration parameters and simulation targets for modelling medical cost inflation rates in the United States. Note that these models are not currently part of our standard ESG calibration, but can be set up on a bespoke basis.
