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KEYNOTE: The History of Monte Carlo Simulation Methods in Financial Engineering


Presenter: Paul Wilmott, Wilmott Associates
Industry Focus: Finance

Paul Wilmott takes you back to the 16th century as he examines quantitative analysis methods over the centuries.  From the origin of pi to 21st century credit risk, see how various methods, especially Monte Carlo simulation, shape how we view the world of finance.

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Quantitative Risk Analyses in the Process Industries: Methodology, Case Studies, and Cost-Benefit Analysis


Presenter: Neil Prophet, ioMosaic
Presenter: Pierre Palmberg, Fire Protection Engineer, Pantektor AB
Industry Focus: Chemical & Process Industry

This presentation demonstrates the quantitative risk analysis technique as applied to process industries, with references to several case studies. Demonstration of successful execution, how these studies assisted in reducing overall risk, and the cost-benefit aspect will be addressed.

Types of hazardous consequences which can contribute to overall risk will be outlined as well, including fire, toxic and explosive effects. The effect of likelihood is addressed in terms of mechanical failure rates, meteorological data, population densities and ignition probabilities.

Quantitative risk analysis is a widely accepted technique within the chemical and process industries. It has been adopted to form legislative requirements in many countries within Europe and Asia.

Quantitative risk analysis typically assesses the risk to society as a whole, or to individuals affected by process operations.

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Risk Management within The National Capital Programme Management Services and the Application of @RISK


Presenter: Tim Wells, Senior Coastal Scientist
Industry Focus: Environmental and Disaster Planning

This presentation describes the process of risk management within the NEECA framework, and in particular discusses how @RISK is being applied.

Risk management is embedded within the core principles of the Environment Agency. The National Capital Programme Management Service (NCPMS) is responsible for delivery of the nation’s capital flood defence programme, and the National Engineering & Environmental Consultancy Agreement No.2 (NEECA2) is used for the provision of all professional services associated with this. Under NEECA2, framework contractors are legally bound to actively manage project risks. Project risks are identified, quantified and managed throughout the project cycle, and @RISK is used as a tool for quantifying risk budgets at the start of each phase of commission. Ongoing risk quantification on the portfolio of Agency projects enables national expenditure to be prioritised.

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Structuring and Pricing Complex Credit Assets with Monte Carlo / @RISK


Presenter: Jörg Günther, Manager of Structured Products
Industry Focus: Banking & Finance

Financial asset management is a quantitative business by nature, though structuring and pricing financial assets, both equities and credit assets, demands qualitative analyses as well. However, cheaper and more powerful computers, as well as more sophisticated software the quantitative aspect is becoming more important and sophisticated.

Building on the overwhelming success of derivative products in the equity world (beginning with Black/Scholes method in the 1970s), the credit world is now – 30 years later – exploring derivative structures. The volumes and growth rates in the credit derivatives market are vast. New pricing models and rating methodology is being developed. And in the centre of this process is the Monte Carlo simulation approach.

This presentation shows how Monte Carlo simulation is providing solutions to central questions, from a general perspective to detailed problems. Examples are given demonstrating how @RISK can be used to address these questions.

The session will cover:

  1. Pricing Financial Assets: General Introduction
    1. Equities vs. Credit - Assets and Derivatives
    2. Differences of Equity and Credit Assets; General Approach to Credit Assets
  2. Credit Assets and Credit Derivatives: Monte Carlo at work
    1. Basel II: How Monte-Carlo-Software helps to cover Regulatory Issues
  3. Brief Case Studies: Problems and Solutions
    1. Pricing a wind power project finance deal
    2. Standard & Poor's Rating Methodology for CDO-Tranches
    3. Structuring a Portfolio Loan (blind-pool PE-assets)

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Modelling Decision Support and Uncertainty using @RISK: The COSIMA-ROAD Model


Presenter: Kim Bang Salling, Ph.D Student, M.Sc.
Industry Focus: Transportation

This presentation concerns a newly developed software model called COSIMA-ROAD for project evaluation in the Danish road sector. COSIMA-ROAD is developed as a cooperative effort between the Danish Road Directorate and the Technical University of Denmark. The applied case study is developed by the Danish Road Directorate. The main purpose of this presentation is primarily to describe how @RISK is used in COSIMA-ROAD. First the two main modules of COSIMA-ROAD are described as respectively a traditional cost-benefit analysis (deterministic point estimate) and a risk analysis using Monte Carlo Simulation (stochastic interval estimate). Next the actual case example is presented with the obtained results. Finally, conclusions and a perspective of the future modelling work are given.

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IRIS Risk Management Software and @RISK


Presenter: Colin Wheeler, Technical Director, Istria Ltd.
Industry Focus: All

Established in 1985, Istria has been in the project risk management business for over 20 years, providing consultancy, training, and software solutions.  Istria’s IRIS software product embeds the Istria Risk Management Method which brings together qualitative and quantitative risk management techniques.  Palisade’s @RISK technology is a key part of IRIS, and has been adopted by the London Underground.  Other clients include DHL, Philips, British Telecom, Shell, and more.

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More Abstracts

Integrated Risk Management for the Energy Sector


Presenter: Salvador Huete, Manager for Strategic & Economic Consulting
Presenter: Arturo Gayoso, Manager for Strategic & Economic Consulting
Industry Focus: Oil & Gas

Soluziona has developed an integral software based methodology to dynamise and implement the Risk Analysis and Management Function in Large Corporations integrating the following elements:

  • Strategy management and control of uncertainty at every level of the organisation: board of directors, executive directors, managers, assistants, etc.
  • The procedure to identify and define the risk model for every business, focusing on aspects that may be opportunities or potential threats.
  • The information system which permits assessment of risk in the context of the each industry using statistic techniques for risk measurement.

The Risk Analysis and Management Application developed by Soluziona integrates the Palisade tool @RISK Developer’s Kit as the core of the Monte Carlo Simulation, providing the following benefits to large corporations:

  • The ability to analyse exposure to risk for a given investment portfolio comprised of national and international assets, thus making the risk-return decisions easier.
  • To support the decision making process related to new investment opportunities and facilitating the analysis of their risk profile.
  • To facilitate the portfolio management through: a) the follow-up of operational and financial indicators and the probability of reaching the proposed targets, and b) the theoretical analysis of an ideal portfolio based on the efficient frontier model.  

Costing Risk; Commercial Reality


Presenter: Rebecca Seeley, Commercial Accountant
Industry Focus: Defence & Aerospace

Not only will the technical aspects of @RISK modelling and risk management be covered in this presentation, but special attention will be given to the commercial implications for using this software. Rebecca’s role as a commercial accountant is to model the technical solution price, and thereby negotiate contract terms and conditions based on this modelling. The conclusions therefore ensure that commercial risk is applied to those who own and manage it, and it also ensures that the solution is appropriately costed within an MPTC contracting framework.

Property 'At Risk'

Presenter: Shabab Qadar, Head of Research, UK and Ireland
Industry Focus: Estate Management

Traditional property appraisals have relied on point estimates as the key determinants of investment value. Our approach is to accept determinants such as rental growth, investment yields, capital value growth, and other property specific factors as highly uncertain and to some extent correlated with each other. Using @RISK we have been able to combine the complexity of property appraisals with Monte Carlo simulation to assess the risk to the internal rate of return of projects, thus ensuring shareholder value is maintained.


Stress Testing Mortgage Portfolio


Presenter: Amar Dhayatker, GE Money - Home Lending UK
Job Title: Planning and Forecasting Manager Risk
Industry Focus: Real Estate and Banking

Lenders want to understand the impact and sensitivities of house prices and other macro economic factors on key metrics to see what the likely impact of a downturn would be on their business. This case study centres on a model built in @RISK 4.5 which looks at historical data to estimate the impact of macro economic stresses on new business volumes, delinquencies, losses, and net income. Secured lending factors like house prices, employment, and Bank of England base rates have an impact on risk and financial metrics. While UK house prices have doubled since 2000, looking ahead there is uncertainty around this. Using techniques like Monte Carlo simulation, time series forecasting, logistic regression, etc. @RISK gives us the flexibility to run sensitivities on a range of scenarios giving not just point estimates on the key metrics but also distribution/confidence intervals of losses.


Best Practice Principles for Modelling in Excel and @RISK

Presenter: Dr Michael Rees, Palisade Corporation

This session aims to highlight some of the key principles that can be applied to create error free and easy to understand models in @RISK and in Excel, with extra attention given to key model building differences between the two products. The session will cover a wide range of topics, including model structure, formatting, and sensitivity analysis.


Real Options Modelling using @RISK and PrecisionTree

Presenter: Dr Michael Rees, Palisade Corporation

In this session, the core concepts behind real options will be introduced, including the value of flexibility in decisions taken under uncertainty. A range of real options models will be shown using @RISK, and then followed by a demonstration of how PrecisionTree may be used for valuing certain real options situations, such as the value associated with structuring a project into phases.


Introduction to DecisionTools Suite & PrecisionTree

Presenter: Erik Westwig, Palisade Corporation

This presentation begins with a brief overview of all the components of The DecisionTools Suite, and will then focus on the PrecisionTree component, showing how it can be used to analyze various problems in decision analysis. A sneak preview of the upcoming release of PrecisionTree 5.0 will be offered, and a complementary beta version of PrecisionTree 5.0 will be available for all attendees.


Introduction to NeuralTools

Presenter: Dr Mirek Janusz, Palisade Corporation

Neural networks predict unknown information by finding patterns in data, and the technology behind NeuralTools is inspired by the functioning of the brain. The presentation will proceed by solving some specific problems to demonstrate both what neural nets can do, and how easy it is to apply this advanced technology using Palisade's NeuralTools. Problems in Banking, Biology, Medicine or other fields will be solved, time permitting.


Introduction to Palisade Developer's Kits

Presenter: Dr Mirek Janusz, Palisade Corporation

Palisade Developer's Kits make Palisade technology available outside the Excel environment. The presentation will provide examples of applications of @RISK and other Palisade technologies in non-spreadsheet programs. Applications may be run on a desktop, over a network, or over the Web. A Web application, for example, may be more easily accessible to employees than a traditional stand-alone program.

Selecting the Right Distribution

Presenter: David Vose, Vose Consulting

How often have you looked at the palette of distributions in @RISK and related tools and wondered which one you should use?

A crucial aspect of risk modelling is the selection of the appropriate distribution to use to represent key uncertain variables. @RISK offers a wealth of probability distributions – some are very intuitive like the Uniform and Triangular, others are somewhat familiar to anyone with a scientific, engineering or finance background, like the Normal and Lognormal. However, many of the other distributions offered in @RISK gives us access to sophisticated probability thinking that can greatly extend and simplify your risk models.

In this lecture David will explain, in simple terms and illustrated with example models, the thinking behind the most powerful distributions, what they model, and how they can be put to use in your risk analyses.


Introduction to @RISK for Project

Presenter: Ian Wallace, Palisade Corporation

The aim of this seminar is to give people a basic understanding of how @RISK for Microsoft Project works, including hands-on experience for setting up and running simulations, and interpreting the results.

Attendees will learn about the key functionality within @RISK for Project in step-by-step method, enabling them to quickly become familiar with basic concepts and terminology.

In addition to graphing and quantifying the risk in a business plan, you will learn how @RISK for Project, using Monte Carlo simulation, enables you to:

  • Calculate the probability of success

  • Graph the margin of error around the most likely outcome

  • Quantify and prioritise the risk drivers
  • Quantify the amount ‘@RISK’

Walk-In Clinic: @RISK and DecisionTools Suite

Presenter: Dr Michael Rees and Erik Westwig, Palisade Corporation

Bring your thorniest @RISK or DecisionTools Suite problems and your trickiest modelling conundrums. Join Palisade experts Dr Michael Rees and software engineer Erik Westwig in this open forum for the discussion of modelling issues. Get customised advice for your particular problem. So open up your laptop and fire away.

@RISK Refresher

Presenter: Dr Michael Rees, Palisade Corporation

This course will provide hands-on training to cover the basic elements of @RISK.  Attendees will learn how to create, run, and interpret basic risk analysis models using Monte Carlo simulation.  The content is suitable for @RISK beginners and those with experience who may require some reminders.  Some experience building basic models in Excel is needed.  The session will cover:

  1. Introduction to risk analysis and @RISK
    1. What is risk analysis?
    2. Example model: basic business plan
    3. Interpretation of output
  2. Further aspects of risk analysis using @RISK

Meet Palisade Developers

Presenter: Dr Michael Rees and Erik Westwig, Palisade Corporation

Dr Mirek Janusz and Erik Westwig are two of Palisade’s top software engineers. Join them for this exciting roundtable discussion, where you’ll be able to provide feedback about Palisade tools and seek advice for your particular modelling issues. So bring your wish list and get to know the people behind @RISK, the DecisionTools Suite, and NeuralTools.

Palisade Corporation
798 Cascadilla Street
Ithaca, NY 14850-3239
800 432 RISK (US/Can)
+1 607 277 8000
+1 607 277 8001 fax
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+44 1895 425050
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