Dynamic Financial Modeling - Issues and Approaches

Daykin, Pentikainen, and Pesonen (as well as other authors) have described the elements that can comprise a dynamic financial model of a property/casualty insurer and have discussed options for several important elements where different approaches are reasonable. This paper further describes the issues which arise in designing and implementing a dynamic financial model and discusses possible methods of analyzing and interpreting the results of DFA analyses. Implementing such a model raises a number of difficult conceptual and technical issues. This paper discusses a number of important model elements and the related implementation issues.