The Palisade Academic
The Most Un-Likely Scenario: Financial Case Study with Example Model

The Most Un-Likely Scenario: Financial Case Study with Example Model

Example Model: The Most Un-Likely Case Scenario

How does a CFO create a financial projection when there are disparate projections of unit volume, and inventory and part availability, in addition to unknowns about hourly pay rates? How can the CFO help his team measure and model all the risks? Through Monte Carlo simulation, the CFO can go beyond a single-point "Most Likely Scenario" to see a whole range of possible outcomes and how likely they are to occur. In the end, sometimes the "Most Likely Scenario" turns out to be the most unlikely, when probabilities are taken into account.

Graham_2015MITSloanSACPaper

For this example, Jerry Scherer wrote an introductory case study that takes readers step-by-step through quantitative risk analysis, demonstrating how different stakeholders have different approaches to risk. The case study is accompanied by an @RISK example model that covers the data and calculations referenced in the article, providing an informative introduction to risk modeling.

Jerry Scherer, President of JB Scherer Consulting Group LLC, has extensive knowledge of Palisade software products. He uses @RISK to provide risk modeling services to companies in the Midwest, identifying the key drivers in their plans, budgets, or forecasts.

» Read the complete case study here

How are you using Palisade software in your research and classroom? We'd love to hear your story.

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.
» 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 7 for your course by contacting:

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

Teaching Tips & Examples

Optimal Product Bundling

Excerpted from Financial Models Using Simulation and Optimization II by Wayne L. Winston, Published by Palisade Corporation

Optimizing product bundling is a common strategy many companies use to offer incentives for customers to purchase more products. Some examples include cable companies bundling internet service, phone and television; computer companies bundling computers, printers, scanners and monitors; or even Palisade Corporation bundling @RISK with other decision making tools in our DecisionTools Suite. The example below demonstrates how to model profitability associated with a set of product prices. It discusses how to set up a spreadsheet to show how to determine the revenue associated with any set of product prices, how to use the INDEX and MATCH functions to model the profitability associated with a set of product prices and lastly, how to use Evolver to find the optimal bundle prices.

» Download the example file
» Learn more about Evolver

Tech Tip of the Month

Multiple SimTables 

Q:
I'm using several RiskSimtable functions because I want to vary multiple variables. Variable A has two values and variable B has five values. How do I set up the 2×5 = 10 simulations to use all combinations of the variables?

A: When you have multiple RiskSimtable functions, the first simulation uses the first value of every RiskSimtable, the second simulation uses the second value of every RiskSimtable, and so on. If the number of simulations is greater than the number of values, that RiskSimtable will return error values for the extra simulations.

This means that if you want 2×5 = 10 combinations, each RiskSimtable needs 10 values. There are two ways to accomplish this: list all ten combinations of values, and have your RiskSimtable functions access each list, or select values of the variables yourself based on the current simulation number without using RiskSimtable. The first method is easier, especially if you have a small number of variables and they have a small number of values. The second method is more flexible and can be extended easily, but it's more complicated. The attached workbook shows both methods, using the same three variables for each. This workbook shows you how to set it up.

» View other Techniques and Tips

Featured White Paper

Estimating the number of cases of acute gastrointestinal illness (AGI) associated with Canadian municipal drinking water systems
Murphy, H. M., et al. Epidemiology and infection 144.07 (2016): 1371-1385.

The number of endemic acute gastrointestinal illness (AGI) cases annually in Canada is estimated at 20.5 million. These cases of AGI are commonly underreported and the cause for such infections are often not determined, hence, it is unknown how much influence the consumption of tap water from municipal drinking water plants has on the Canadian AGI burden. This study provides a framework to estimate national waterborne illness and uses Palisade’s @RISK to estimate the number of AGI cases that are a result of consuming municipal tap water in Canada.

Palisade Corporation  Read the paper here


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, BigPicture for mind mapping and data exploration, 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


In This Issue

» The Most Un-Likely
   Scenario: Financial
   Case Study with
   Example Model

» Licensing Options

» Teaching Tips &
   Examples

   Optimal Product Bundling

» Tech Tip
   Multiple SimTables

» Featured White Paper
   Estimating the number of
   cases of acute
   gastrointestinal illness (AGI)
   associated with Canadian
   municipal drinking
   water systems

» About Palisade and the
   DecisionTools Suite

Keep in Touch
Palisade Corporationspacer.gifPalisade Corporationspacer.gifspacer.gifspacer.gifPalisade Corporationspacer.gifPalisade Corporationspacer.gif

Palisade 
CorporationClick to chat live withspacer.gif
a sales representative
spacer.gif

 
Events

2016 Palisade Risk Conferences
An intensive networking and software training event presented by Palisade trainers and consultants, with real-world case studies presented by industry experts.

Asia-Pacific
» Kuala Lumpur: 18 October

South America
» Mexico City: el 25 de agosto (información en breve)

North America
» Houston: 10 June
» Chicago: 27 July
» New Orleans: 1-2 November

EMEA & India
» Bangalore: 19 April
» New Delhi: 21 April
» Munich: 9 June
» Amsterdam: 14 June
» Edinburgh: 22 September
» Moscow: 6 October
» Cape Town: 10 November

Training Seminars

» EMEA
London: July 13–15
London: September 6–8
Frankfurt: September 7–9
Amsterdam: September 27–29
Sandton: September 27–29

» Asia Pacific
Adelaide: June 22–23
Sydney: July 12–13
Brisbane: August 16–17
Melbourne: September 13–14
Perth: October 11–12

» North America
Vancouver, BC: June 28–29
Washington DC: July 28–29
Calgary, AB: August 9–11
Salt Lake City, UT: September 20–21

» Latin America
San José: julio 26–28
Panamá: agosto 3–5
Montevideo: agosto 16–18
Bogotá: septiembre 13–15


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

» English
» Español
» Português
» Deutsch
» Français
» 日本語版
» 中文版
» русский

@RISK
The world's most widely
used risk analysis tool
@RISK» @RISK for Excel
@RISK» For Project Management
@RISK» For Six Sigma

BigPicture
Mind Mapping and Data Exploration for Excel

PrecisionTree
Visual decision analysis
for spreadsheets

NeuralTools
Sophisticated neural networks for spreadsheets

StatTools
Advanced statistical analysis for spreadsheets

Evolver
The Innovative Optimizer
for Windows


Intel and the Intel logo are trademarks or registered trademarks of Intel Corporation or its subsidiaries in the United States and other countries.


Palisade Corporation
©2016 Palisade Corporation, visit www.palisade.com

Palisade Corporation
798 Cascadilla Street, Ithaca, NY 14850 USA, +1 607 277 8000 sales@palisade.com
Palisade Latinoamérica
798 Cascadilla Street Ithaca, NY 14850 EEUU, +1 607 277 8000 x319 servicioalcliente@palisade.com
Palisade Brasil
Praia de Botafogo, nº 501 Sala 101, Botafogo 22250-000 Rio de Janeiro-RJ, +55 (21) 3958 1443 vendas@palisade.com
Palisade Europe UK Ltd
31 The Green, West Drayton, Middlesex, UB7 7PN, UK, +44 1895 425050 salesEMEA@palisade.com
Palisade Asia-Pacific Pty Limited
Lvl 12, Australia Square Plaza, 95 Pitt Street Sydney, NSW 2000 Australia, +61 2 9252 5922 salesAP@palisade.com

Palisade Asia-Pacific, Tokyo Office
〒 150-8512 東京都渋谷区桜丘町 26-1 セルリアンタワー15F 電話 03-5456-5287 sales.jp@palisade.com