The Wilkie investment model, often just called Wilkie model, is a stochastic asset model developed by A. D. Wilkie that describes the behavior of various economics factors as stochastic

time series In mathematics, a time series is a series of data points indexed (or listed or graphed) in time order. Most commonly, a time series is a sequence taken at successive equally spaced points in time. Thus it is a sequence of discrete-time data. Ex ...

. These time series are generated by

autoregressive model In statistics, econometrics and signal processing, an autoregressive (AR) model is a representation of a type of random process; as such, it is used to describe certain time-varying processes in nature, economics, etc. The autoregressive model spe ...

s. The main factor of the model which influences all asset prices is the consumer price index. The model is mainly in use for actuarial work and

asset liability management Asset and liability management (often abbreviated ALM) is the practice of managing financial risks that arise due to mismatches between the assets and liabilities as part of an investment strategy in financial accounting. ALM sits between risk ...

. Because of the stochastic properties of that model it is mainly combined with

Monte Carlo method Monte Carlo methods, or Monte Carlo experiments, are a broad class of computational algorithms that rely on repeated random sampling to obtain numerical results. The underlying concept is to use randomness to solve problems that might be determi ...

s. Wilkie first proposed the model in 1986, in a paper published in the ''Transactions of the Faculty of Actuaries''. It has since been the subject of extensive study and debate. Wilkie himself updated and expanded the model in a second paper published in 1995. He advises to use that model to determine the "funnel of doubt", which can be seen as an interval of minimum and maximum development of a corresponding economic factor.

Components

* price inflation * wage inflation * share yield * share dividend * consols yield (long-term interest rate) * bank rate (short-term interest rate)

References

{{reflist Actuarial science Financial models Monte Carlo methods in finance