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GEMS™ - Economic Scenario Generator (ESG)

GEMS is a rapid deployment ESG capable of producing both real-world and risk-neutral scenarios. It can be implemented to work with your existing systems or function as a module of DFA’s ADVISE suite of services. As the most advanced ESG on the market today, GEMS simulates a company’s economic operating environment, providing a common economic modeling framework across the enterprise to ensure consistency, so for the first time, company planning can reflect a realistic market backdrop.

GEMS generates stochastic scenarios for the future states of the world, or paths, in which the company being modeled could evolve. These stochastic scenarios can help your company significantly enhance risk management, value-based management, asset liability management, and more. To ensure that the conclusions drawn from the analysis are valid, GEMS creates a wide spectrum of external dynamic economic environments that embrace the correct distribution of mild and severe conditions that your company might face in the future.

Simulate Financial Market and Macro-Economic Variables

GEMS simulates financial market variables including Bonds (Treasury, Corporate, Mortgage, Municipal), Currencies, Common Stock, Real Estate, Interest and Equity Options, and Real Estate Investment Trusts, as well as macro-economic variables such as inflation, actual & expected CPI, unemployment rate, and GDP.

• Produce real-world and risk-neutral scenarios. Relations within and across markets—such as spread behavior, yield curve inversion, volatility, and other factors—play out as they have in the ups and downs of the past.
• Stress test against user concerns and expectations by filtering for particular situations and confluences of events.
• Model multiple economies for a worldwide view of interconnected economic risk.

Gain a Better Understanding of Risk

GEMS is an advanced modeling and estimation technology that produces empirically validated realistic economic behavior. Its cutting-edge internal models, superior calibration & validation produce more accurate scenarios, with more realistic tails. The value GEMS brings to a company is the ability to capture both the distribution and the dynamics of the economic and financial variables that have a material impact on the company. For example, if the risk-adjusted returns on different asset classes do not accurately reflect historical time-varying relationships, then conclusions drawn from the simulation regarding the merits of alternative investment strategies will not be valid. Accurate modeling of the structure and interaction between the asset pricing models, as well as careful parameterization, has allowed us to reproduce the correct asset return relationships.

GEMS Easily Integrates with Existing Systems

Whether operating in conjunction with your existing systems or as a module in ADVISE, GEMS is designed to provide the most accurate, complete economic modeling technology available in the market. By easily integrating with your existing modeling software, GEMS enables you to get up and running quickly with minimal training to produce unexpected but plausible outcomes that give you a better understanding of risk, specifically:

• The capture of detailed stochastic interplay between cash flows from assets and liabilities.
• Quantifying the likelihood, the extent and the root causes of financial distress.
• Determining risk capital necessary to support liabilities.
• Iteration, which allows convergence on optimal strategy for return given risk or risk given return.
• Enables you to easily calculate an accurate EEV.

Re-calibration in Just Minutes

Quarterly updates to GEMS are automatically included with the system, along with documented comparisons of model and actual market behavior. All this, at no additional cost to you, saving you valuable time and resources, unlike other ESGs on the market today. In addition, GEMS offers special calibration tools which make it easy and fast to calibrate the latest market prices.

Endorsed by Industry Experts

When you choose GEMS, you can rest assured that you are implementing a proven, industry-leading solution. A panel of the most prominent insurance industry experts, including Harry H. Panjer, Ph.D, thoroughly reviewed GEMS and “enthusiastically recommends” the software. Download the GEMS Advisory Board Report.

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