Description: Describes using the new multi-risk scenario generator to create sensitivity tests at moderately adverse probability levels, resulting in margins to use for PBR.

Description: The author delves into other important parts that should be in the scope of model validation besides the code.

Description: Presentation at the 41st Actuarial Research Conference held on August 10-12, 2006 in Montreal, QC. This paper considers the problem of extending regime-switching models for asset returns to the situation with multiple asset markets. The conditional tail expectation CTE is highly sensitive to the assumed dependence structure between the regime models for the different markets. A Monte Carlo simulation is used to illustrate the cost of misspecification. The authors find that the model most commonly used by practitioners is worse than all of the alternatives that they investigate.