Stochastic models
liability-matching models that assume that the liability payments and the asset cash flows are uncertain. |
Similar financial terms
Stochastic variableA variable whose future value is uncertain.
Stochastic process
An equation describing the probabilistic behavior of a stochastic variable.
Yield curve option-pricing models
Models that can incorporate different volatility assumptions along the yield curve, such as the Black-Derman-Toy model. Also called arbitrage-free option-pricing models.
Extrapolative statistical models
Statistical models that apply a formula to historical data and project results for a future period. Such models include the simple linear trend model, the simple exponential model, and the simple autoregressive model.
