Overview of scenario tree generation methods, applied in financial and economic decision making

Authors

  • Miklós Vázsonyi
https://doi.org/10.3311/pp.so.2006-1.04

Abstract

Scenario tree generation methods are powerful decision-making tools when decisions have to be made under uncertainty. Instead of giving a point estimation of multivariate random variables scenario tree generation methods provide likely scenarios of future with associated probabilities. The scenarios can cover only the next time step or even more steps ahead in time. This paper summarizes the most common scenario tree generation methods applied in financial prediction to give an overall overview of the field. Application examples are provided to illustrate real-life implementations.

Keywords:

scenario tree generation, financial decision making, probabilistic programming, default prediction, time series prediction

How to Cite

Vázsonyi, M. (2006) “Overview of scenario tree generation methods, applied in financial and economic decision making”, Periodica Polytechnica Social and Management Sciences, 14(1), pp. 29–37. https://doi.org/10.3311/pp.so.2006-1.04

Issue

Section

Articles