Classify Scenarios

Determine criteria to partition the data for initializing weak, normal, and robust scenarios.

Initializing prospective scenarios in Scenario Lab

To help you get started with defining a finite set of prospective scenarios, the Classify Scenarios screen allows you to initialize a Weak, Normal, and Robust scenario by

1. Specifying a reference economic variable to partition market environments.

2. Specifying the directional economic favorability of the variable. (e.g. low GNP year-on-year changes are a weak indicator, while high unemployment values are a weak indicator)

3. Determining the cutoffs from the weak, normal, and robust ranges.

Scenario Lab automatically helps you initialize default upper and lower thresholds for a selected reference economic variable to the $25^{\text{th}}$ and $75^{\text{th}}$ percentiles of its empirical distribution.

The weak, normal, and robust scenario estimates are calculated by the conditional means of the sub-samples as defined by you.