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CSTEP Scenario Reduction for Model Efficiency

An open-source software specializing in scenario sampling methods published
by Yvonne Chueh on 27 September 2012

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Transcript of CSTEP Scenario Reduction for Model Efficiency

CSTEP Cluster-Distance Sampling for Tail Estimation of Probability Open-Source software for Risk Scenario/Attribute Sampling/searching and
Model Efficiency Strategies CWU Computer Science Department http://www.cwu.edu/~ahmadyt/stochastic.html
Stochastic Team: Alan Chandler, Nathan Wood, Eric Brown,
Temourshah Ahmady;
Advisor: Dr. James Schwing

CWU Math Department

UCONN, Dr. Charles Vinsonhaler, Dr. Jeyaraj Vadiveloo

Edward F. Cowman, FSA, MAAA
“As to credits - I don't need any face time for this. Access to
your new software will be reward enough for my efforts over
the past several weeks. However, just so you will know that
I'm a real person I'm attaching a short bio that our firm uses
in our brochure.” Acknowledgement Representative-> Pivot Sampling -> Optimal Parametric Distribution Fitting ->BC-MLE
Practice:
TAS TRITON MG-ALFA GC GCC RSS
1996 1998 1999 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Research:
NY 7 [Longley-Cook]
Representative scenarios [Christiansen]
Scenario sampling SALMS [Chueh]
Parametric model outcome fitting AMOOF [Chueh]
Scenario reduction research tool CSTEP [Chueh]
BMLE
[Johnson & Chueh] Model Efficiency Techniques CSTEP
(Distance) Cluster Sampling for Tail Estimation of
Probability Distribution of Financial Model Outcome Distance formulas, sufficient sample size, controlled sampling bias and error—stratified, pivot probability, replications
General scenario sampling, Algorithms & Procedure
Composite/nested scenario selection,
Nested stochastic analysis (1M, 4500
periods)
Economic scenarios as well as risk attributes ;random v.s. deterministic Model Efficiency Using CSTEP CSTEP : Cluster (-Distance)Sampling for Efficient Estimation of Tail Probability Distribution of Financial Model Outcome
Upgrade from SALMS—Editable distance formula and scenario format
8,388,608 scenarios, 4500+periods universe capacity, flexible sample size, reversible & reusable sampling
Risk scenario study and reduction(e.g. interest rate, equity return, quantifiable credit risk and ph behaviors…) Introduction to CSTEP CSTEP : Over one month 30+ projects submitted and 5 selected
Replace spreadsheet-based platform and SALMS that has been used by modelers since 2003
Open-source computational tool (software) for scenario sampling studies and implementations Introduction to CSTEP Model outcome, as a complicated function of stochastic risk scenarios, not possible to have a closed-form; however, has been proved to be continuous if
uniform bounds on number of projection periods and projected cash flow amounts
The farther/closer the two scenarios, the farther/closer their model outcome values
Extreme scenarios are where the functions extrema/tail distributions are projected
Extreme scenarios replicate tail distributions, making modeling efficient Algorithms Significance Method





With economic value parameters Ck=1
Simple operation
Time: Θ(n)
Memory: Θ(n) Algorithms Euclidean Distance Method





More complex
Time: Θ(n*m) Pivoting process
Memory: Θ(n) Algorithms Present Value Distance Method




With economic value parameters
More complex
Time: Θ(n*m) Pivoting process
Memory: Θ(n) Algorithms Present Value Distance Method




With economic value parameters
More complex
Time: Θ(n*m) Pivoting process
Memory: Θ(n) Algorithms Significance Method



With economic value parameters Ck=1
Simple operation
Time: Θ(n)
Memory: Θ(n) Algorithms GUI GUI PROCESS Yvonne Chueh Programing Languages

C# Graphical User Interface

C++ Sampling algorithms

Lua Formula Scripts Requires Windows (XP, Vista, 7) Questions?

Yvonne Chueh
chueh@cwu.edu
http://www.cwu.edu/~chueh

Director of Actuarial Science Program
Professor of Central Washington University
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