The Wilkie model was the actuarial profession’s first siSome Comments on the Wilkie Investment
Document ID: 2001-62 (previously 2001/018)
Published on: 1st July 2001
Author: Craig Turnbull, John Hibbert
The Wilkie model was the actuarial profession’s first significant venture into stochastic asset modelling. This note explores the limitations of the model which include the inherent mean-reversion in the equity model as well as the statistical (rather than economic) emphasis of the model (which makes it unsuitable for the modelling of almost any derivatives). In particular, this statistical emphasis has a major impact on interest rate modelling – there is no arbitrage-free term structure, and interest and inflation rates considered together are likely to produce implausible behaviour.
