Miami User Conference
Session Program Announced
October 25-26, 2007 at The Alexander Hotel

Palisade is pleased to announce the schedule for its North America User Conference is now available. Kicked off by an overview of the new @RISK 5.0 from Palisade president Sam McLafferty, the schedule includes a keynote address discussing business and financial applications of @RISK from noted author and professor Dr. Wayne Winston. A top MBA professor at Indiana University’s Kelley School of Business, Dr. Winston will speak on sports modeling, project selection, capital budgeting, and more.

Tracks include hands-on training using @RISK 5.0, @RISK for Project, and other Palisade software; software presentations on how to choose the best @RISK distribution and value real options; and industry case studies from actual users. Oil and gas, insurance loss modeling, utilities regulation, environmental applications and more will be presented by experts from Suncor, Florida Power and Light, and many others.

Please note that the schedule is subject to change without notice.

» View the User Conference schedule
» Register now for $495 only $295
» Book your room at the Alexander now for only $199 —
limited availability!

DecisionTools^® Suite
Blooms among the Bloomberg Set
In its early years, the DecisionTools Suite served as decision support for the specialists on Wall Street and in the commodities markets who had quantitative know-how. Today demand for the suite to assess securities transactions comes from a broader cross-section of the folks who read Bloomberg. These business people face not only straightforward questions about equities, but complex, time-constrained decisions about hedging and derivatives, and they are finding success coordinating the tools bundled with @RISK—in particular PrecisionTree and RISKOptimizer—to support any given course of action.

» How is the DecisionTools Suite used today? Read more.
» More about The DecisionTools Suite

Free Live Webcast:
Determining the Optimal Level of Swaps
Learn about swaps in a FREE live webcast on Palisade.com. Presented by Roy Nersesian of Monmouth University.

Swaps are a means of controlling risk. If a high price or a low price for a commodity, or a high or low rate for currency exchange or interest rates, represents risk, then a swap can “prevent” that risk from occurring. But there is a cost if the market swings in the opposite direction. For instance, a crude oil swap at $50 per barrel may save a company from having to sell oil below $50, but it must forego incremental profits if oil prices were to rise above $50 up to the swap volume. Thus swaps can be dangerous to one’s financial health in the sense of foregoing incremental profits!

» Register now for FREE Live Webcast
"Determining the Optimal Level of Swaps"
19 July 2007, 11:00am - 12:00pm ET / 4:00 - 5:00 pm GMT

NeuralTools and Wool Pricing
Australia’s 3 billion (AUD) wool industry provides 70 percent of the world’s raw wool used for clothing. Yet a significant portion of that wool is still marketed and sold in small lots by the traditional mode at open cry auctions. It’s a very risky marketplace for both the farmers and the buyers who contract in advance to deliver wool to processors. Recently Kimbal Curtis, a wool industry specialist with the Western Australian Department of Agriculture, began to use NeuralTools to predict market prices for farm lots of less abundant wool types. The result is a model that not only produces reliable predictions of wool prices, but allows buyers and sellers to explore the price implications of the independent variables.

» Read the full case study
» Submit a case study

PrecisionTree Advanced Nodes
Did you know that PrecisionTree supports more than just simple chance, decision, and payoff nodes? Logic nodes are available to build advanced conditional “thinking” into your models. And reference nodes are very useful for navigating larger, more complex trees.

Logic Nodes - Logic nodes are a special type of node where the optimum branch is selected according to conditions the user defines. The name of this node derives from the fact that the pre-set conditions are usually phrased in a logic statement (using expressions such as "less than", "equal to", etc.). A logic node behaves like a decision node, but it selects the branch whose branch logic formula evaluates to TRUE as the logical (optimum) decision.

Reference Nodes - Reference nodes can be used to reference a sub-tree. The sub-tree can be on any sheet in the workbook. Use reference nodes to simplify a tree, to reference the same sub-tree many times in a tree, or to build a tree that’s too large to fit on one spreadsheet.

» More on PrecisionTree

Banking Fraud Detection

» Australian firm bursts on to IT security market
Technique: Neural Networks  » see NeuralTools
Source: Computerworld, 3 July 2007

Australian banking security firm FraudSight detected more than AU$100 million worth of fraud over the last two years by applying data analytics and neural networking to financial crimes such as online banking fraud and money laundering.

Biology/Pharmaceutical

» Using Engineering Techniques to Study
Biological Systems
Technique: Monte Carlo simulation  » see @RISK
Source: R&D Magazine, 19 June 2007

Systems biology software is taking advantage of the modeling, simulation, and analysis techniques created for engineering and mathematical systems. For example, the drug Artemisinin is a proven cure for malaria. At $2 per dose, however, it is far beyond the reach of the developing countries that need it most. A team of systems biologists solved this problem by designing a new organism that produces the same drug compound for $0.02 a dose.

Simulation allows engineers to observe a system in action, change its inputs, parameters, and components, and analyze the results computationally. Most engineering simulations are deterministic, but biological simulations must incorporate the innate randomness of nature. To account for this randomness, systems biologists use Monte Carlo techniques and stochastic simulations.

Foreign Exchange Modeling

» Derivative Fitch launches beta CFXO model
Technique: Monte Carlo simulation  » see @RISK
Source: Credit Magazine, 27 June 2007

Derivative Fitch has released a beta version of its Vector CFXO model for collateralized foreign exchange obligations (CFXOs). Fitch’s quantitative analysis of forex reference assets is based on Monte Carlo simulation using asymmetric Garch processes with jumps to fit individual FX rates.

Healthcare

» Pre-kindergarten TB testing not cost effective,
study finds
Technique: Decision analysis/Decision trees  » see DecisionTools Suite and PrecisionTree
Source: EurekAlert, 2 July 2007

The health care system in California could save nearly $1.3 million a year with few adverse public health effects if it discontinued universal tuberculosis skin testing of children entering kindergarten, according to a new study by researchers at the University of California, San Francisco. The study was conducted using a computer-based decision analysis model.

» SAS Customers Honored at Computerworld’s
Annual Awards Gala
Technique: Neural networks  » see NeuralTools
Source: Businesswire, 18 June 2007

Computerworld chose Healthways for its program employing artificial neural network predictive models to risk stratify health plan members and improve healthcare outcomes. Every day, the company helps more than 2.5 million people manage their health and potentially improve their quality of life.

Information Technology

» Why business rules?
Technique: Decision trees  » see PrecisionTree
Source: SDA India Magazine, 27 June 2007

Sometimes it makes sense to express a rule as an if-then statement, but often it is more useful to express a set of rules that involve the same conditional terms in either a table or tree form. A decision table is defined by the set of conditional terms as column headers with each row representing a single rule and the result of each rule in the final column.

A decision tree also combines a set of business rules into one graphical display, but rather than each rule being a row, each rule is a path through the tree, branching at each conditional term. Decision trees are extremely useful for viewing multiple related rules at once, to ensure that you have addressed all scenarios and that the rules makes business sense as a group.

Oil and Gas

» U.S. attacks problem of 'produced water'
Technique: Decision trees  » see PrecisionTree
Source: Physorg.com, 20 June 2007

The U.S. Department of Energy has designed a Web program to help oil and natural gas companies solve the environmental challenge of produced water. Produced water is water extracted from the subsurface with oil and gas. The program provides a decision tree for technological options to deal with produced water issues.

Retirement Planning

» Making sure retirement portfolio goes the distance: Older investor must weigh risk vs. time
Technique: Monte Carlo simulation  » see @RISK
Source: Chicago Tribune, 1 July 2007

Financial planner Christine Fahlund ran suggested investments through a Monte Carlo computer simulation analysis. Over a 10-year period, the more aggressive portfolio didn't boost returns enough to justify the higher risks, she said.

» Are your finances ready for retirement?
Technique: Monte Carlo simulation  » see @RISK
Source: The Wall Street Journal, 17 June 2007

Research shows that almost half the people who plan for retirement end up changing their savings plans. Selecting a rate of withdrawal is crucial -- how much to pull from your nest egg each year. To make the decision easier, we can use a technique called Monte Carlo analysis, which gives us a probability that our savings will last as long as we do, given tens of thousands of potential economic, market, mortality and spending possibilities.

Semiconductor Manufacturing

» Nanotechnology fabrication depends on
sophisticated simulation tools
Technique: Monte Carlo simulation  » see @RISK
Source: Nanowerk, 3 July 2007

Continuing miniaturization has moved the semiconductor industry into the nano realm with leading chip manufacturers well on their way to CPUs using 32nm process technology (expected by 2009). Being able to model and simulate nanodevices requires an entirely new generation of simulation tools and techniques. "Among the various simulation techniques, the most advanced is certainly the so-called Monte Carlo simulation method, based on the solution of particles physics and transport by means of random numbers" Dr. Jean Michel Sellier explains.

Sports Modeling

» A few notes on the Cub Brewer series
Technique: Monte Carlo simulation  » see @RISK
Source: Brew Crew Ball, 29 June 2007

BP predicted the Brewers would win the division 76.6% of the time, running a real Monte Carlo and using the real schedule. I then reran the numbers with all possible outcomes for this series. Here are the results.

» Development of a New
Monte Carlo Reactor Physics Code
Application: Reactor simulator calculations
Source: Innovations Report, 27 June 2007

Research Scientist Jaakko Leppänen from VTT Technical Research Centre of Finland has developed a new calculation code in his doctoral thesis for the modeling of neutron physics in nuclear reactors. The so-called Monte Carlo method used by Leppänen has not been widely used for the production of input parameters for three-dimensional reactor simulator calculations.

The Monte Carlo method is a basic tool in particle transport problems, and it is well suited for tasks requiring the detailed modeling of geometry and physics. The method has been used in reactor physics calculations for decades, and the applications have mainly been restricted by computer capacity. In Leppänen's thesis, the use of the method is extended to new applications, when input parameters for three-dimensional reactor simulator calculations are generated using a Monte Carlo based lattice code.

» Carbon Nanoscrolls:
A Promising Material for Hydrogen Storage
Application: Estimating H2 storage capacity of nanoscrolls
Source: American Chemical Society, 20 June 2007

A multiscale theoretical approach was used for the investigation of hydrogen storage in the recently synthesized carbon nanoscrolls. First, ab initio calculations at the density functional level of theory (DFT) were performed in order to (a) calculate the binding energy of H2 molecules at the walls of nanoscrolls and (b) fit the parameters of the interatomic potential used in Monte Carlo simulations. Second, classical Monte Carlo simulations were performed for estimating the H2 storage capacity of "experimental size" nanoscrolls containing thousands of atoms. Our results show that pure carbon nanoscrolls cannot accumulate hydrogen because the interlayer distance is too small. However, an opening of the spiral structure to approximately 7 Å followed by alkali doping can make them very promising materials for hydrogen storage application, reaching 3 wt % at ambient temperature and pressure.

This is said by a report on the paper by New Scientist magazine to be more than twice the hydrogen storage density achieved so far with other materials.

Expert Answers to Technical Questions

Dear Amy,

I’d like to troubleshoot my @RISK model. Can I stop and view each iteration - one at a time?

—P.H.

Dear P.H.,

Choosing ‘Monte Carlo’ for the Standard Recalc setting in @RISK for Excel allows you to single step through one Excel recalculation at a time, mimicking a single iteration in @RISK. This can be a helpful tool when troubleshooting a model.

To use this feature:

1. Select @RISK > Simulation > Settings from the Excel toolbar (or click on the Simulation Settings icon in the @RISK toolbar).

2. Select the Sampling tab.

3. In the Standard Recalc section, place the mark next to Monte Carlo.

4. Click OK.

When a recalculation is executed by pressing the <F9> key, the cells that contain @RISK distribution functions appear as they would during execution of a simulation with new samples drawn for distribution functions each recalculation. @RISK is a perfect companion to PrecisionTree. @RISK allows you to 1) quantify the uncertainty that exists in the values and probabilities which define your decision trees, and 2) more accurately describe chance events as a continuous range of possible outcomes. Using this information, @RISK performs a Monte Carlo simulation on your decision tree, analyzing every possible outcome and graphically illustrating the risks you face.