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Rotman School of Management Students Learn To Make Key Financial Decisions Using Monte Carlo Simulation

Rotman School of Management Students
Learn To Make Key Financial Decisions Using Monte Carlo Simulation

Understanding how to use Monte Carlo simulation to account for risk in decision-making is quickly becoming a required skill for today’s business leaders, says Asher Drory, Adjunct Professor of Finance at University of Toronto's Rotman School of Management.

“Many leading corporations are now using Monte Carlo simulation in their business cases,” Professor Drory says. “Students who want a leg up with such corporations should seek out all opportunities to get experience in working with Monte Carlo simulation.”

In his Financial Management course, Drory uses @RISK to teach some 200 graduate students each year how to use Monte Carlo simulation in analyzing working capital and capital budgeting decisions. Monte Carlo simulation furnishes the decision-maker with a range of possible outcomes and the probabilities that will occur for any choice of action.

For example, Drory's classes use @RISK and Monte Carlo simulation to look at:

  • How forecasts of financial statements are needed to determine future funding requirements in working capital decisions.
  • How forecasts of future free cash flows are required and risk must be assessed in capital budgeting analysis.

Separately, Drory and his students use Palisade’s PrecisionTree software in modeling decision tree analysis for new product development. The students have access to the entire DecisionTools Suite which is loaded on all of the computers in the Rotman Finance Laboratory.

» Read the full case study
» More about the Rotman School of Business
   at the University of Toronto

» More about Professor Asher Drory
 

@RISK Students keep telling me how amazing
      @RISK is. It has made my class a lot
      more interesting.
Trial Versions

                           Professor Ravi Mateti,
                           Concordia University

Recent School Adoptions

Over 60,000 students use the DecisionTools Suite annually in their MBA and graduate level programs. In 2012, over 800 universities worldwide adopted the DecisionTools Suite. Professors in business, engineering, OR, and other fields keep their students on the cutting edge by teaching the latest analytical techniques from Palisade. Some major schools with programs and courses that standardized on the DecisionTools Suite last month include:

US and Canada:

  American University
Cornell University
Kansas State University
Northwestern University
Ohio State University
Oklahoma State University
Penn State Great Valley
Purdue University
Savannah State University
SUNY Oswego
Texas A&M University
University of Alberta
University of New Brunswick
University of Notre Dame
University of Wyoming
Virginia Tech
Washington State University
Washington University
Whitworth University


International:

  American University of Sharjah - United Arab Emirates
Bogazici University - Turkey
Fundacao Getulio Vargas - Brazil
Høgskolen i Sør-Trøndelag - Norway
IAMSR Abo Akademi University - Finland
Institute of Technology Sligo - Ireland
Instituto Nacional de Salud Publica - Mexico
ITESO AC - Mexico
Martin-Luther-Universitaet Halle-Wittenberg - Germany
Swinburne University of Technology - Australia
Universidade de Coimbra - FE - Portugal
Universitaet Bern - Switzerland
Universität für Bodenkultur Wien - Austria
Universitetet i Stavanger - Norway
University of Aberdeen - United Kingdom
University of Canterbury - New Zealand
University of Queensland - Australia
University of Westminster - United Kingdom
Licensing Options

There are three easy ways to get the DecisionTools Suite for your students:

 

Course Licenses available from Palisade. These are economical, annually renewing bulk licenses for both
network lab and laptop installation. Palisade offers a complimentary Live Web Training session to all instructors who order a Course License.
» Learn more

Student Versions from Palisade. These are 12-month versions available for purchase individually by students through either the Palisade web site or the school store.
» Learn more

Textbook Editions available bundled with textbooks.
These are time- and model-limited licenses.
» Learn more

Get DecisionTools Suite 6 for your course by contacting:

AddressPalisade Academic Sales    
800-432-7475 / 607-277-8000
academic@palisade.com

@RISK @RISK is a wonderful tool which helps
      business people make accurate, efficient
      financial projections, as well as
      accurately establish which risks their
      investments are exposed to.
Trial Versions

                                   Dr. Gabriel Rovayo, Professor,
                                   Instituto de Desarrollo Empresarial,
                                   Ecuador

Teaching Tips & Examples

The DecisionTools Suite is a great way to present quantitative techniques in a straightforward, easy-to-understand way. Each month we feature an example or tip illustrating how students can gain "real world" benefits by implementing quantitative analysis.

The Miller-Orr Cash Management Model Excerpted from Decision Making Under Uncertainty
with RISKOptimizer
, by Wayne Winston, published
by Palisade Corporation

Consider a business that experiences uncertain cash flows each week. A crucial decision is how much cash to keep available. If we keep too little cash available, we can run out of cash. If we keep too much cash on hand, we are losing the opportunity to earn interest or income on invested cash. If we adjust our cash level daily, however, we are overwhelmed by transaction costs. Miller and Orr (1966) devised a cash management model for such situations. Under the Miller-Orr model, the business specifies a minimum cash level below which they do not want their cash level to go. Then Miller-Orr specify a cash management policy by two parameters U and T. If our cash on hand exceeds U, then we transfer enough cash nto investments to bring our beginning cash to a target T. If our cash on hand drops below the minimum level (call it M), then we transfer enough money out of securities and into cash to bring our cash level to the target T. Here is an example of how to use RISKOptimizer to determine an optimal cash management policy.

Palisade Corporation Download the example spreadsheet and
    step-by-step instructions

Tech Tip of the Month

@RISK MiniToolbar
The @RISK MiniToolbar is a popup toolbar that can be used to quickly create @RISK graphs and enter probability distributions. The MiniToolbar is displayed with the right-click menu in Excel.

The MiniToolbar is context-sensitive, as the available buttons will depend on the selected cells in Excel. In addition, if you select multiple cells (for example, several output cells) and select a graph icon on the MiniToolbar, a graph will be displayed for each output. You can also use the minitoolbar to create a scatter graph, overlay graph or summary graph for the selected cells.

The display of the MiniToolbar can be turned on and off using @RISK’s Application Settings command on the Utilities menu.

» See more in the @RISK manual

Textbook of the Month

The DecisionTools Suite is included in dozens of major textbooks, and is a key component of more titles every year. Authors use the DecisionTools Suite to illustrate key analytical concepts and build examples demonstrating the value of quantitative techniques in business, OR, and engineering.

Spreadsheet Modeling and Applications -
Essentials of Practical Management Science
By Dr. Chris Albright and Wayne Winston

Knowing spreadsheets can save your job? Absolutely. The authors show you how just a little spreadsheet magic can solve real-life business problems. It's relevant, it's simple and it comes with DecisionTools Suite to make homework a snap. This title is available with DecisionTools Suite and StatTools software for Excel.

» Learn more from the publisher
» See a list of books bundled with Palisade software

Featured White Paper

Professors, PhD candidates, practitioners and others often use the DecisionTools Suite as part of a complex analysis to address important problems. These analyses are published in white papers. Each month we will feature a different academic white paper addressing a wide range of issues.

The Effectiveness of Using Project
Management Tools and Techniques
for Delivering Projects
Mufeed Hajjaji, Paul Denton, Steve Jackson
The University of Huddersfield, Queensgate, Huddersfield

 
There is no doubt that any project manager has to make difficult decisions that could ultimately affect the stability and security of his or her organization. The most difficult decision that a project manager can face is to determine which project can be accepted and consequently secure investment of the enterprise’s recourses. However, deciding to invest in a particular project requires making great efforts to make sure that the project would increase the company value otherwise the company may experience lost time, money, and valuable resources which could be used in other investment opportunities. Nowadays, project management has been developed and supported by various tools and techniques.

Palisade Corporation  Read the full paper here

Academic Live Webcast

Experts using Palisade software share examples and teaching tips. Register online at no charge.

@RISK for Engineers
To be presented by Andre Kleyner, Delphi Corporation
March 28, 2013, 11:00am EDT (Eastern Daylight Time)

This webcast is intended to show the benefits of using Monte Carlo simulation by various types of engineers including design, systems, quality, and reliability. In many cases design parameters are random variables, which makes quality, reliability and performance of the product susceptible to variation. Dr. Kleyner will share his experience of applying @RISK in his engineering practice including Six Sigma applications as well as to teaching Monte Carlo simulation to engineering students.

» Read more details about the webcast and register here
 

The use of @RISK with an
Online Investment Portal

To be presented by Charlie Strout, Seven Shadow, LLC, Prudena
May 16, 2013, 11:00am EDT (Eastern Daylight Time)

In this complimentary live webcast, Charlie Stout will show how Prudena allows users to export their portfolios into Excel files that are formatted for use by @RISK to perform more advanced simulations and risk-management analysis. He will demonstrate how these easy-to-use tools give investors insights into their decisions and assist investors in developing a decision-making process that helps them to avoid common investing pitfalls--improving performance.

» Read more details about the webcast and register here
 
» See complete Webcast schedule

Palisade Corporation

The Academic Global Leader in
Risk and Decision Analysis
Palisade Corporation is the world’s leading provider of risk and decision analysis software and solutions. Founded in 1984, its products @RISK and the DecisionTools Suite are used by over 95% of the Fortune 100, in nearly every industry around the world. Palisade is headquartered in New York State, and has offices in London, Sydney, Rio de Janeiro, and Tokyo.

What is The DecisionTools Suite?
The DecisionTools Suite is the world’s only integrated set of risk and decision analysis programs. The Suite includes @RISK for Monte Carlo simulation, PrecisionTree for decision trees, and TopRank for “what if” sensitivity analysis. In addition, DecisionTools Suite comes with StatTools for statistical analysis and forecasting, NeuralTools for predictive neural networks, and Evolver and RISKOptimizer for optimization. All programs work together seamlessly, and all integrate completely with Microsoft Excel for ease of use and maximum flexibility.

The Suite is offered in three affordable and flexible licensing options for those in academia: Student Versions, Course Licenses and Full Academic Versions.

» Schools using Palisade software
»
Textbooks using Palisade software

Story to Share?
How are you using Palisade software in your classroom, lab, or field work? Let us know by answering a few brief questions. Please send replies to academic@palisade.com.

  • Your name, title, institute, and field of interest.
  • How long have you been using Palisade software?
  • Which Palisade software do you use in your class/lab/field work, and what is the course name (if applicable)?
  • What problem(s) do you address with the software?
  • How does Palisade software help you and your students?
  • Any other comments.

In This Issue

» Univ. of Toronto Students
   Learn To Make Key
   Financial Decisions Using
   Monte Carlo Simulation

» Recent School Adoptions

» Licensing Options

» Teaching Tips &
   Examples

   The Miller-Orr Cash
   Management Model

» Tech Tip
   @RISK MiniToolbar

» Textbook of the Month
   Spreadsheet Modeling and
   Applications - Essentials
   of Practical Management
   Science

» Featured White Paper
   The Effectiveness of Using
   Project Management Tools
   and Techniques for
   Delivering Projects

» Academic Live Webcasts
   @RISK for Engineers
 
   The use of @RISK with an
   Online Investment Portal

» About Palisade and the
   DecisionTools Suite

» Story to Share?

Keep in Touch
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2013 Palisade Risk Conferences
 
Plan now for the eighth Palisade Risk Conference series, to start in March next year in South America. More information about each conference to be announced soon.
 
» Santiago de Chile:
   19 March

» São Paulo: 21 March
» Johannesburg: 25 April
» Tokyo: 14 May
» Shanghai: 16 May
» London: 11 June
» Frankfurt: 13 June
» Las Vegas: 20-21 November

Events

» Training Seminars
Asia-Pacific
Brisbane: 26-27 March
Singapore: 17-18 April
Auckland: 22-23 May
Sydney: 5-6 June
Perth: 19-20 June
Kuala Lumpur: 3-4 July

EMEA
Oslo: 2-3 April
Moscow: 10-12 April
London: 16-18 April
Johannesburg: 22-24 April
Abu Dhabi: 14-16 May
London: 4-6 June
Paris: 11-13 June

Latin America
México D.F.: 9-11 de abril
Buenos Aires: 9-11 de abril
Quito: 23-25 de abril
Santiago: 14-16 de mayo
Bogotá: 4-6 de junio

North America
Charleston: 3-4 April
Washington, DC: 9-11 April
San Diego: 16-18 April
Chicago: 23-25 April
New York, NY: 1-3 May
Houston: 8-9 May
Seattle: 15-16 May
Detroit: 21-22 May
Calgary: 4-6 June
Portland: 11-12 June
New Orleans: 19-20 June
Toronto: 25-27 June
 

» Live Web Training
Decision-Making and
Quantitative Risk Analysis
using @RISK
PART I

1-2 May, 9am-1pm ET
31 Oct. - 1 Nov., 1pm-5pm ET

PART II
15-16 May, 9am-1pm ET
14-15 Nov., 1pm-5pm ET

Decision-Making and
Quantitative Risk Analysis
using the DecisionTools Suite
PART I

11-12 July, 1pm-5pm ET
9-10 Dec., 9am-1pm ET

PART II
25-26 July, 1pm-5pm ET
19-20 Dec., 9am-1pm ET

Project Risk Assessment
using @RISK

18-19 Sept., 1pm-5pm ET

Trial Versions

Palisade software is available in fully functional trial versions. Try @RISK or any of our software today!

The DecisionTools Suite
The complete risk and
decision analysis toolkit

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@RISK» @RISK for Excel
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Visual decision analysis
for spreadsheets

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StatTools
Advanced statistical analysis for spreadsheets

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The Innovative Optimizer
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