DEFINITION of 'Multivariate Model'
A popular statistical tool that uses multiple variables to forecast possible investment outcomes. Multivariate models predict outcomes of situations that are affected by more than one variable, and are widely used in the financial world.
Next Up
BREAKING DOWN 'Multivariate Model'
Analysts use them to estimate cash flows and evaluate new product ideas. Portfolio managers and financial advisors use them to predict the impact of individual investments on total portfolio returns. In the insurance industry, multivariate models help insurers estimate risk. Analysts also use this type of model to value stock options.
RELATED TERMS

Stochastic Modeling
A method of financial modeling in which one or more variables ... 
Financial Modeling
The process by which a firm constructs a financial representation ... 
Model Risk
A type of risk that occurs when a financial model used to measure ... 
Default Model
A type of model used by financial institutions to determine the ... 
Expected Value
Anticipated value for a given investment. In statistics and probability ... 
Sensitivity Analysis
Sensitivity analysis is a technique used to determine how different ...
Related Articles

Investing
Multivariate Models: The Monte Carlo Analysis
This decisionmaking tool integrates the idea that every decision has an impact on overall risk. 
Investing
Scenario Analysis Provides Glimpse Of Portfolio Potential
This statistical method estimates how far a stock might fall in a worstcase scenario. 
Investing
Understanding Financial Models
A financial model is a representation of some aspects of a firm or given security. It uses historical numbers to create calculations that inform financial recommendations or predict future financial ... 
Insights
Understanding Regression
Regression is a statistical analysis that attempts to predict the effect of one or more variables on another variable. 
Investing
What's a Sensitivity Analysis?
Sensitivity analysis is used in financial modeling to determine how one variable (the target variable) may be affected by changes in another variable (the input variable). 
Investing
The Basics Of Business Forecasting
Discover the methods behind financial forecasts and the risks inherent when we seek to predict the future. 
Investing
Understanding Forecasting
Forecasting is the use of historical data to predict the future. 
Investing
How Do Professionals Forecast Crude Oil Prices?
Discover how the future price of oil is predicted with a weighted combination of mathematical tools. Economists largely use five main models as their base. 
Small Business
Calculating (Small) Company Credit Risk
Determining creditworthiness of smaller and mediumsized corporations isn't as easy as for larger companies, but these tips can help. 
Investing
Financial Models You Can Create With Excel
The relatively modest amount of time it takes to build these models can pay for itself by leading you to better investment decisions.
RELATED FAQS

What is the difference between financial forecasting and financial modelling?
Understand the difference between financial forecasting and financial modeling, and learn why a company should conduct both ... Read Answer >> 
What variables are most important when making a prediction through sensitivity analysis?
Explore sensitivity analysis and how this method considers different variables to determine a course of action based on statistical ... Read Answer >> 
What percentage of a diversified portfolio should be exposed to the insurance sector?
Learn how it is critical to innovate and improve financial models and techniques used in quantitative analysis, and understand ... Read Answer >> 
What is the average return on equity for a company in the electronics sector?
Learn about the BlackScholes option pricing model and the binomial options model, and understand the advantages of the binomial ... Read Answer >> 
What are some examples of ways that sensitivity analysis can be used?
Understand the concept of sensitivity analysis and learn about the wide variety of disciplines to which it can be applied. Read Answer >>