Economic Scenario Generator
Monte Carlo macro paths for GDP, inflation, interest rates, unemployment, and equity index
Input Parameters (JSON)
Scenario Summary
Median Paths (quick preview)
Example Presets
When to Use Economic Scenario Generator
Financial Risk Assessment
Evaluate macro shocks on capital, liquidity, and solvency via percentile projections.
Portfolio Stress Testing
Overlay pessimistic vs optimistic paths to stress test investment strategies.
Economic Forecasting
Explore ranges for GDP growth and inflation with confidence bands.
Capital Planning
Quantify distribution of outcomes for planning buffers and limits.
Education & Teaching
Demonstrate Monte Carlo concepts with macroeconomic examples.
Decision Support
Compare scenario percentiles to inform strategic decisions.
Frequently Asked Questions
What is an Economic Scenario Generator (ESG)?
An ESG is a quantitative tool that constructs forward-looking macroeconomic scenarios under explicit assumptions. It generates plausible paths for variables such as GDP, inflation, short-term interest rates, unemployment, and a generic equity index to support risk analysis, valuation, stress testing, and planning.
Which variables and outputs are covered by this tool?
The tool covers GDP index level, CPI index level, a mean-reverting short-term interest rate, unemployment rate with bounds, and a generic equity index level. It produces percentile time series (5%, 50%, 95%) and a human-readable summary showing start-to-end medians and bands.
What stochastic models are used and why?
GDP, CPI, and equity levels follow Geometric Brownian Motion (GBM) to ensure non-negativity and multiplicative compounding. The short rate follows an Ornstein–Uhlenbeck (mean-reverting) process. Unemployment follows a bounded drift process to reflect practical floors and caps. These simple models balance interpretability with computational efficiency.
How do I operate the tool step-by-step?
Choose a preset (Optimistic, Baseline, Pessimistic) or paste/edit a custom JSON in the input panel. Click “Generate Scenarios” (Ctrl+Enter) to run Monte Carlo. Review the textual summary, copy it, or download the full JSON that includes parameters and percentiles for all variables.
Which parameters can I configure and what are their units?
You can set horizon (months), dtMonths (time step in months), sims (number of simulations), seed (reproducibility), correlation mode, and per-variable parameters. For GBM variables: start (level), mu (annual drift), sigma (annual volatility). For the short rate: kappa, theta, sigma, floor, cap. For unemployment: mu, sigma, floor, cap. All drifts/volatilities are annualized where applicable.
What do the scenario presets represent?
The Optimistic preset assumes higher growth and lower volatility; the Baseline preset reflects moderate assumptions; the Pessimistic preset stresses growth, inflation, and rates with higher volatility. You may start from any preset and then customize parameters as needed.
How are cross-variable correlations incorporated?
You may choose independent shocks or use a preset correlation matrix with Cholesky decomposition to produce correlated Gaussian shocks. Intuitively, GDP and unemployment are negatively related, while inflation and rates exhibit positive co-movement. Equity partially loads on GDP and CPI shocks.
How should I interpret the percentiles and the median path?
Percentile bands (5%, 50%, 95%) summarize the distribution across simulated paths at each time point. The 50% path is the median, while 5% and 95% provide a simple confidence band for downside and upside ranges under the model assumptions.
What export formats are available and how to reproduce results?
You can copy the textual summary or download a JSON file containing parameters and percentile arrays. Set an explicit integer seed to make runs reproducible. Changing sims, seed, or any parameter will change the outputs accordingly.
What about privacy and data security?
All computations occur locally in your browser. The tool does not upload or store your inputs. Clipboard operations require your browser’s permission and are initiated by you.
Is this financial advice or a production-grade ESG?
No. This is an educational tool with simplified models. Outputs are not investment advice and should not be used as the sole basis for financial decisions. Professional judgment and institutional-grade models are recommended for high-stakes use cases.
Performance, limitations, and support
Performance depends on your device and the number of simulations. The models are intentionally minimal and may not capture regime shifts or tail dependencies. If you need assistance or have feature requests, please use the platform’s feedback channel.
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