Iranian Financial Engineering Association(IFEA) International Journal of Finance & Managerial Accounting 2588-4379 2 6 2017 08 01 Simulation of Long-term Returns with Stochastic Correlations 1 9 11371 EN Giorgio Consigli Department of Mathematics, Statistics and Computer Science, University of Bergamo, Via dei Caniana, 24127 Bergamo, Italy (Corresponding author) Mehdi M. Hosseinzadeh Department of Mathematics, Statistics and Computer Science, University of Bergamo, Via dei Caniana, 24127 Bergamo, Italy Journal Article 2017 02 23 This paper focuses on a nonlinear stochastic model for financial simulation and forecasting based on assumptions of multivariate stochastic correlation, with an application to the European market. We present in particular the key elements of a structured hierarchical econometric model that can be used to forecast financial and commodity markets relying on statistical and simulation methods. The investment universe includes money-market, fixed-income, inflation-linked bonds as well as equity and commodity indices. For each such investment opportunity a dedicated statistical model has been developed to generate future return paths describing the uncertainty the investment manager is facing over time. http://www.ijfma.ir/article_11371_8e80aa8666161beb9f25f5bed48f06c7.pdf