Examine Scenarios
Estimate scenario probabilities, revise scenario estimates, or define new scenarios.
This is the core of Scenario Lab. This screen allows you to
Create new scenarios to extend beyond Weak, Normal, and Robust scenarios.
Review the underlying Covariance assumption.
Estimate probabilities of prospective scenarios.
Edit scenario probabilities and solve for scenario estimates that are consistent with specified views.
The grid at the top of the screen shows the prospective economic scenarios (columns) and the corresponding economic variables values / views (rows). Scenario Lab measure the statistical distance of the prospective scenario estimates from this table to an anchor condition: past historical norm or current prevailing conditions.
Scenario Lab then converts these statistical distances from either the historical norm or current conditions into relative likelihoods.
The relative likelihoods are then normalized and displayed as scenario probabilities in the bottom grid.
Add or create new Prospective Economic Scenarios
To add a new prospective economic scenario (column) in the top grid, click on on the create new scenario button and follow on-screen instructions.
You can create up and work with up to nine prospective economic scenarios
Review Covariance
To review the historical covariance used for the underlying analysis, click on Review Covariance to show a table of standard deviations and correlation coefficients across the economic variables.
Revising Scenario Probabilities
If you would like to edit or override the scenario probabilities with your own views, click on the corresponding scenario probability to edit:
Revising a scenario probability will engage a numerical solver and update scenario estimates in the top grid to reconcile the empirically-driven process with your new views.
If you would like to reset any edits back to the initial set of empirical-driven probabilities and scenario estimates, click on Reset.
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