The Uncertainty of long-term Capital Market Assumptions

Long-term Capital Market Assumptions (CMAs) are a very important ingredient of any investment decision-making framework. However, what sometimes seems to be forgotten, is that these long-term CMAs are also very uncertain. In this paper, we discuss the relevance of long-term CMAs, the benefits of using a building block approach to derive estimates of long-term CMAs, and, last but not least, an approach to explicitly take into account the uncertainty of such estimates in an Economic Scenario Generator.

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