Financial planning uses two types of models for financial projections – ‘deterministic’ and ‘stochastic’.
EV use a stochastic model, which is a more sophisticated type of modelling than deterministic. A stochastic model can forecast thousands of potential future economic scenarios.
Our stochastic model runs 1,000 scenarios for every calculation. We then order and rank the scenarios to provide a realistic range of results for the financial projections. This is particularly useful when helping a client/user plan for their future.
For more information and examples on the differences between stochastic and deterministic modelling, please view our blog:
In addition, you can download a preview of our stochastic vs deterministic book here: