About Insight

Insight lies at the heart of EValue. A sophisticated economic scenario generator (ESG), Insight produces thousands of potential plausible forecasts starting from today's market conditions.

Continuous development has led to an innovative interest rate model, specifically designed to handle today's low interest environment.

An overview

Insight bases its forecasts on current market conditions. Designed to capture the interdependencies of asset class returns and economic variables, Insight aims to be objective and use empirical data wherever possible.

Insight is updated every quarter to take account of current market conditions. Quarterly releases are intended to be data driven and don't incorporate subjective market views. In exceptional circumstances when an immediate response is desirable, we can update it straight away.

A review of the model's parameters takes place each year. This involves some analysis of historical data, which can result in changes to returns and volatility over different time periods and to the correlations between asset classes.

Read the Insight asset model overview to find out more about the philosophy and structure of the model.

Interest rate model

Insight starts by modelling interest rates. This is key when modelling return and risk over the long term.

When rates increase, future return expectations for cash and bond returns rise. In the case of bonds, it's essential to consider how the negative price impact of interest rate rises is offset by improved reinvestment returns over the time of interest.

For example, Insight's sophisticated interest model can accurately measure the risk of fixed interest investments over their term to maturity.

Following the "credit crunch" and the sea change in fixed interest yields, we developed a low interest rate model. To do this, we spent two years completing the unfinished work of celebrated economist, Fischer Black, supported by researchers from Cambridge University.

By capturing the term dependency characteristics of asset classes, Insight uses these different durational risk profile "shapes" to build optimal risk reduction investment strategies.

Read the academic paper published on the work