E-Focus: Merck Uses @RISK for Value-at-Risk In This Issue
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Regional Seminars
2011 Palisade Risk ConferencesIndustry experts present real-world case studies about innovative and interesting approaches to risk and decision analysis. Also, ever-popular workshops and training delivered by Palisade consultants, and sneak previews of new software.
» Amsterdam: 29-30 March
» Mexico City: 1-2 June
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Merck Uses @RISK for Value-at-Risk
For a company the size of Merck, the multinational pharmaceutical giant, awareness of value-at-risk (VAR) is crucial to the performance of its risk management programs. And of course, foreign exchange rates are one of the most volatile forces at work in any assessment of value-at-risk.

Art Misyan, Director of Foreign Exchange at Merck, is responsible for the company's ongoing surveillance of its currency risks. He has been using @RISK for years. "We love it because it incorporates distribution fitting and gives us the flexibility to evaluate alternative distributions on screen." He also finds it useful for presentations to Merck's senior managers, who are quite conversant with probability and risk analysis.

» Read the full case study

Join PwC, Unilever, DNV and More at the
Palisade Risk Conference in Amsterdam

Palisade is pleased to announce the first Risk Conference of 2011 at the historic West Indische Huis in Amsterdam. The programme includes discussions of risk and decision making from PricewaterhouseCoopers, Unilever, DNV, Captum Advisors, and many, many others. This is truly an international event, attracting participants from different countries and spanning multiple industry sectors such as energy, insurance, project management, finance and more. In addition to case studies from industry, Palisade’s own experts will provide training on @RISK, DecisionTools Suite, and the latest software techniques. In addition, you’ll see sneak previews of new software in the pipeline from Palisade.

The 2011 Palisade Risk Conference series will continue in Mexico City on June 1-2, in Rio de Janeiro on September 14-15, and in Las Vegas on November 10-11.

» View the conference programme
» Register now and save

Analysis Placebos: The Difference Between
Perceived and Real Benefits of Risk Analysis
and Decision Models

by Douglas Hubbard and Douglas Samuelson, Analytics magazine, Fall 2009

In this recent article, the authors examine decision analysis methods that merely make people feel better about their decisions with those that produce measurable improvements over time. They find that Monte Carlo simulation is one of the most effective methods for decision and risk analysis.

» Read the full article

Palisade Blog Headlines
Facts Are Not for Quantitative Sissies
Tuesday, February 8, 2011, by Holly Bailey
Media reports on the global search for alternative and sustainable energy sources often dwell in the happy realms of possibility and leave me happily clinging to a cheerful bits of information they offer up––"if everyone over the age of 21 replaced on incandescent lightbulb with a fluorescent," and blah, blah––when was the last time you read such an account that came to an unhappy conclusion or the prospect of failure? And who knows whether these bits are facts or factoids, the unreliable ...
» Read more

Statistician Stays with Day Job, despite Cracking the Lottery
Monday, February 7, 2011, by DMUU Training Team
A pair of scratch-off lottery tickets found in a pile of papers on his desk started Mohan Srivastsava to musing. The lottery is purported to be random, but of course it is not -- it is carefully controlled. For Srivastsava, a trained statistician with degrees from MIT and Stanford University, this "randomness" reminded him of his day job in which he consults for mining and oil companies. There must be a pattern, and forces such as likelihood come into play. The basic principals behind risk analysis and statistical analysis revealed secrets of the lotto. Jonah Lehrer wrote a fascinating article ...
» Read more

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Case Study
Forestalling Foreclosure: Using @RISK to
Analyze Debt Capacity and Find a Strategic
Alternative to Default

As presented by Steven Slezak, California Polytechnic State University, at the Palisade Risk Conference Las Vegas,
November 5, 2010

This case study illustrates how @RISK can provide valuable insights into a complicated financial issue and lead to a strategic solution.

A medical center in rural California secured a 30-year mortgage from a lending agency backed by the U.S. Government. Combined annual principal and interest payments became a burden shortly after the loan was issued due to an unexpected decrease in the center’s net income, leading the borrower to suspend mortgage payments and the lender to begin the default process.

An Excel spreadsheet was used to determine target the minimum net income level need to support debt capacity for the mortgage at various points of time in the maturity of the mortgage. An @RISK analysis was then performed to determine the probability that the center would be able to meet that minimum net income level within the next 12 months, and to find out if refinancing would be a viable solution under the circumstances. The @RISK simulation helped to determine an optimal strategy.

» Read the full abstract and download the presentation

Product Spotlight
Correlating Related Variables
When identifying the uncertain values in your Excel worksheet, you have to decide whether your variables are correlated, that is, whether some or all change as a result of others changing. For example, when interest rates are low, housing starts may tend to rise. The Corrmat function in @RISK is used to identify correlated variables. It is extremely important to correctly recognize correlations between variables, or your model might generate nonsensical results.

With @RISK you can easily define correlations between probability distributions using the Define Correlations window. The Define Correlations window displays a correlation matrix with the correlation coefficients between the probability distributions in the matrix. You can enter correlation coefficients between inputs in matrix cells, copy values in from a matrix in Excel, or use scatter plots to assess and enter correlations.

You can also create a Correlated Time Series from a multi-period range that contains a set of similar distributions in each time period. You might often like to correlate each period’s distributions using the same correlation matrix.

» Watch a short video on correlations
» Watch a short video on correlated time series
» Read more about correlations in @RISK

Introduction a l’analyse des Risques et
décisions avec @RISK et Decision Tools Suite
Session Web – En Français

Présenté par Manuel Carmona, Palisade
10 mars 2011, 10:00am GMT

Ces sessions présentent une introduction à l'analyse probabiliste et montrent comment la simulation Monte Carlo et d’autres techniques, peuvent être appliquées dans la solution de problèmes d’analyse des risques et décisions dans le cadre des affaires. (Il n'y a aucun frais pour ce webcast.)
» Inscrivez-vous maintenant
Einführung zur Risiko & Entscheidungsanalyse
mit @RISK und der DecisionTools Suite
Webinar – Deutsch

Präsentiert von Stephan Beeusaert, Palisade
11 März 2011, 10:00 am GMT

Diese Live-Veranstaltungen sind so konzipiert, Ihnen eine Einführung in die probabilistische Analyse anzubieten und Ihnen zu zeigen wie Monte-Carlo-Simulation und andere Analyseverfahren Ihre tägliche Business-Analysen erweitern können. (Es gibt keine Gebühr für diesen Webcast.)
» Jetzt registrieren
Introduction to Risk & Decision Analysis using
@RISK & The DecisionTools Suite

Presented by Doug Oldfield, Palisade
March 15, 2011, 10:00am GMT

The webinar will explore some of the ways in which organisations are applying Palisade tools. From oil and gas, insurance and finance through to healthcare, defence and construction, @RISK and the other tools in the DecisionTools Suite enhance the decision making capabilities of some of the world’s most successful companies. (There is NO CHARGE for this webcast.)
» Register now
Introduction to Risk & Decision Analysis using @RISK
Presented by Chris Marlow, Palisade
March 24, 2011, 10:00am GMT

This event is designed to provide an entry-level introduction into probabilistic analysis and will show how Monte Carlo simulation and other techniques can be applied to your everyday business analyses. (There is NO CHARGE for this webcast.)
» Register now
Gambling, Money Management, and Monte Carlo Simulation
Presented by Wayne Winston, Professor of Operations & Decision
Technologies, Kelley School of Business at Indiana University
March 24, 2011, 1:00pm ET

Wayne Winston will demonstrate @RISK models that apply to various casino games such as roulette, keno, poker and craps. He will also explain the money management strategy (known as the Kelly Growth Criterion) adopted by the students profiled in the movie "21." (There is NO CHARGE for this webcast.)
» Register now
Using RISKOptimizer/Evolver in
Determining Optimal Swaps for Risk Mitigation

Presented by Roy Nersesian, Center for Energy Marine Transportation and Public Policy, Columbia University
March 30, 2011, 11:00am ET

Determining optimal levels of financial derivatives to mitigate risk oftentimes involve normal or lognormal distribution along with a standard deviation. In this live webcast, Roy Nersesian proposes that simulating future prices can be done by examining historical daily or weekly price changes to obtain a histogram of absolute price changes. (There is NO CHARGE for this webcast.)
» Register now


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