Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Modeling & Simulation:
Finance & Economics
Larry Boyer
Principal Economist, Freddie Mac
M&S Caucus Leadership Summit
Febru...
1
Topics
M&S Use
How M&S Enhances Progress
Key Challenges
Key Elements for Education
Suggestions for Furthering Progress
2
M&S Use
Pricing and Costing
Capital
Risk Management
Scenario Analysis (What if?)
Product Design
Research and Development
3
How M&S Enhances Progress
Increase ability to reduce and manage risk
Increase product offerings and reduce costs
to bene...
4
Key Challenges
Layering Models and Judgment
Past vs. Future
Shocks (Oil, Terrorism, etc.)
Human Intervention (policy)
Fa...
5
Modeling Tension
Judgment Statistical Model
•Uses “intangibles”
•Cognitive Awareness
•Experience
•Hidden biases
•Impreci...
6
Annual Market Rent Growth 1980-1999
-2
0
2
4
6
8
10
12
14
16
18
Year
RentGrowth(%)
Kansas City
San Jose
Kansas City 7.1 ...
7
Example Part 2
San Jose became more volatile. Was it possible to foresee this
change? Would an econometric model have su...
8
Key Elements for Education
Improve Math and Science Education from pre-K
through high school
Add more sophisticated, app...
9
Suggestions for Furthering Progress
Bring Theory and Practice together more
More Interdisciplinary Cooperation
Related D...
Upcoming SlideShare
Loading in …5
×

Modeling & Simulation: Economics and Finance

725 views

Published on

This presentation was provided to the 2008 Modeling and Simulation Leadership Summit in conjunction with the Congressional Modeling and Simulation Caucus to provide participants with an understanding of M&S applications and challenges in the fields of Finance and Economics. I was part of the panel on “M&S Applications in Infrastructure, Security and Education” where we discussed the applications of M&S and keys to the successful development of M&S in the future through supporting educational initiatives.
http://proceedings.ndia.org/81C0/MSResolution.pdf
http://proceedings.ndia.org/81C0/4_Boyer_Briefing.pdf

  • Be the first to comment

  • Be the first to like this

Modeling & Simulation: Economics and Finance

  1. 1. Modeling & Simulation: Finance & Economics Larry Boyer Principal Economist, Freddie Mac M&S Caucus Leadership Summit February 11, 2008
  2. 2. 1 Topics M&S Use How M&S Enhances Progress Key Challenges Key Elements for Education Suggestions for Furthering Progress
  3. 3. 2 M&S Use Pricing and Costing Capital Risk Management Scenario Analysis (What if?) Product Design Research and Development
  4. 4. 3 How M&S Enhances Progress Increase ability to reduce and manage risk Increase product offerings and reduce costs to benefit consumers Increased the ability of corporations and policy makers to anticipate economic changes and adjust
  5. 5. 4 Key Challenges Layering Models and Judgment Past vs. Future Shocks (Oil, Terrorism, etc.) Human Intervention (policy) Faster, Cheaper, Better Technology Complexity of Interactions
  6. 6. 5 Modeling Tension Judgment Statistical Model •Uses “intangibles” •Cognitive Awareness •Experience •Hidden biases •Imprecise •Use current market info •Measurable •Future is similar to past •Dispassionate •Discover hidden relationships •Data reporting lag •Measurement error •Statistical biases
  7. 7. 6 Annual Market Rent Growth 1980-1999 -2 0 2 4 6 8 10 12 14 16 18 Year RentGrowth(%) Kansas City San Jose Kansas City 7.1 8.6 7.9 10.7 11.8 10 5.2 1.2 -0.7 -0.9 1.2 2.1 1.8 4.5 3 4.4 7 2.6 3.3 4.2 San Jose 9.2 6.4 11 13.9 8.2 3.2 1.8 4.1 4.9 3.8 1.4 2.8 1.3 1.9 1.9 13.6 16 6.5 6.4 7.8 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Example Part 1 What is the expected rent growth going forward 2000–2007? Will these 2 metro areas perform similarly? Source: Reis Services, LLC
  8. 8. 7 Example Part 2 San Jose became more volatile. Was it possible to foresee this change? Would an econometric model have successfully forecast? Annual Market Rent Growth 1980-2007 -20 -10 0 10 20 30 40 Year RentGrowth(%) Kansas City San Jose Kansas City 7.1 8.6 7.9 10.7 11.8 10 5.2 1.2 -0.7 -0.9 1.2 2.1 1.8 4.5 3 4.4 7 2.6 3.3 4.2 4.4 2.3 0.9 1.1 0.6 0 2 2.7 San Jose 9.2 6.4 11 13.9 8.2 3.2 1.8 4.1 4.9 3.8 1.4 2.8 1.3 1.9 1.9 13.6 16 6.5 6.4 7.8 34.8 -15.8 -10.5 -8.2 -1.6 3.2 8 8.2 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: Reis Services, LLC
  9. 9. 8 Key Elements for Education Improve Math and Science Education from pre-K through high school Add more sophisticated, applied simulation study to undergraduate coursework Create interdisciplinary coursework, with applied research and problem solving as the core work Develop students to have both business and mathematical acumen
  10. 10. 9 Suggestions for Furthering Progress Bring Theory and Practice together more More Interdisciplinary Cooperation Related Disciplines (Economics & Finance) Other Disciplines (Science & Engineer & Finance) Research to address Key Challenges Past vs. Future Shocks Layering Models & Judgment

×