Quantitative Finance > Risk Management
[Submitted on 8 Aug 2025
]
Title: A Time Series Model for Three Asset Classes used in Financial Simulator
Title: 用于金融模拟器的三种资产类别的时间序列模型
Abstract: We create a dynamic stochastic general equilibrium model for annual returns of three asset classes: the USA Standard & Poor (S&P) stock index, the international stock index, and the USA Bank of America investment-grade corporate bond index. Using this, we made an online financial app simulating wealth process. This includes options for regular withdrawals and contributions. Four factors are: S&P volatility and earnings, corporate BAA rate, and long-short Treasury bond spread. Our valuation measure is an improvement of Shiller's cyclically adjusted price-earnings ratio. We use classic linear regression models, and make residuals white noise by dividing by annual volatility. We use multivariate kernel density estimation for residuals. We state and prove long-term stability results.
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