GWU uses @RISK and RISKOptimizer for Informed Decisions around Debt Portfolios and Capital Investments

George Washington University Researchers Use @RISK and RISKOptimizer for Informed Decisions Around Debt Portfolios and Capital Investments
When faced with multiple kinds of debt instruments or exclusive capital investments, how can an analyst make a decision that maximizes reward but minimizes risk? Emmanuel Donkor, a quantitative analyst and faculty member of the School of Engineering and Applied Sciences (SEAS) at George Washington University addressed these complicated problems, using Palisade software @RISK and RISKOptimizer. His research has led to new and better methods for addressing these financial statistical problems.

Dr. Donkor used Palisade software tools @RISK and RISKOptimizer to conduct two separate research projects published in the journal the Engineering Economist. The first paper (one of the highest ranked articles in the journal) tackled the improvement of debt portfolios for financing capital investment plans, while the other project empirically tested stochastic dominance relationships in risky capital investments.

In his first project, Dr. Donkor, along with Associate Professor Michael Duffey, used @RISK and RISKOptimizer to help analyze and then recommend an appropriate mix of different debt instruments for financing a capital investment project. They first developed a stochastic financial model in Excel, and used RISKOptimizer’s simulation optimization capability to select an optimal mix of fixed-rate debt instruments such that default occurred no more than 5% of the time. They then used @RISK simulation to evaluate the performance of the debt policy prescribed by the optimization model.

In his second project, Dr. Donkor created a spreadsheet framework that uses @RISK to implement empirical tests of stochastic dominance (i.e., ranking random prospects based on preferences regarding outcomes). As a result of Dr. Donkor’s work, analysts can use an @RISK model to empirically test for the best option among many, allowing them to make defensible decisions when comparing risky capital investments, rather than visually-based ‘best guesses’.

 » Read the full case study
 » More about @RISK

@RISK The challenge is to determine an
      appropriate or optimal mix of these
      different debt sources that simultaneously
      maximizes project value and reduces the
      risk of default.
Trial Versions

                        Dr. Emmanuel Donkor, School of Engineering
                        and Applied Sciences, George Washington University

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.
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Get DecisionTools Suite 6 for your course by contacting:

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Teaching Tips & Examples

The DecisionTools Suite is a great way to present quantitative techniques in a straightforward, easy-to-understand way for students.

Modeling a Risk Arbitrage
Excerpted from Financial Models 2: Using Simulation and Optimization, by Wayne Winston, published by Palisade Corp.

During merger negotiations the company launching the takeover bid (called the Cannibal) offers to trade r shares of their stock for 1 share of the target (called the Prey). When a merger is in process a risk arbitrage strategy involves going long one share of stock of the takeover target (the Prey) and short r shares of the stock of the company launching the takeover (Cannibal). If the deal goes through we lock in an “arbitrage profit” by using the shares of the Cannibal obtained from our long position in the takeover target to cover our short position in the Cannibal. If the deal does not go through, we can lose a ton of money if the Cannibal increases in price and the merger target goes down in price. Here is an example in @RISK of how to model the risk inherent in a risk arbitrage trade.

» Download example file and view step-by-step instructions

Tech Tip of the Month

Stress Analysis Command
Sets up and runs a Stress Analysis
Stress Analysis allows you to analyze the effects of stressing @RISK distributions. Stressing a distribution restricts samples drawn from the distribution, to values between a specified pair of percentiles. Alternatively, stressing can be done by specifying a new “stress” distribution that will be sampled, instead of the original distribution in your model. With Stress Analysis you can select a number of @RISK distributions, and run simulations while stressing those distributions jointly in one simulation, or separately in multiple simulations. By stressing the selected distributions, you can analyze scenarios without changing your model.

After completing a simulation in @RISK, Stress Analysis provides you with a collection of reports and graphs that you can use to analyze the effects of stressing certain distributions on a selected model output.

Palisade Learn more from the @RISK manual

Featured White Paper

The DecisionTools Suite is part of complex analyses published in white papers.

On the Use of Ensemble Models
for Credit Evaluation
by Albert Fensterstock, Jim Salters and Ryan Willging
The Credit and Financial Management Review – Fourth Quarter 2013

As described in this paper, Ensemble Models represent a very powerful method for determining credit risk. And, given the fact that they can be built in Excel, makes them a very attractive alternative to other methods of credit evaluation, and in particular to judgment-based models. This class of models can aid in providing an easy to implement solution to the associated problems of initial credit evaluation, credit line determination and ongoing debt tracking.

Palisade  Read the full paper here

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:

  Babson College
Duke University
Embry Riddle Aeronautical University
George Washington University
Indiana University
Louisiana State University
Michigan State University
New Jersey Institute of Technology
Northern Alberta Institute of Technology
Penn State University
Rice University
Southern Methodist University
Syracuse University
Texas A & M University
Texas Tech University
UC Los Angeles
Université de Moncton
University of Guelph
University of Maryland
University of Nevada Las Vegas
University of Texas Austin
University of Toledo
University of Toronto
University of Utah
University of Virginia
University of Wyoming


  American University of Beirut - Lebanon
Denmark Technical University - Denmark
Hogeschool Rotterdam - Netherlands
IIL Mexico - Mexico
Indian School of Business - India
Kanagawa University - Japan
London School of Economics and Political Science - United Kingdom
Pontificia Universidad Catolica de Chile - Chile
Technische Universitaet Darmstadt - Germany
TECSUP No 1 - Peru
Universidad Adolfo Ibanez - Chile
Universidad de Talca - Chile
Universidad EAFIT - Colombia
Universidad ESAN - Peru
Universidad Europea de Madrid - Spain
Universidad Pontificia Bolivariana - Colombia
Universidade Estadual Paulista - Brazil
Universidade Federal de Uberlвndia - Brazil
Universitaet Duisburg-Essen - Germany
Universite Paris Dauphine - France
University of Cambridge - United Kingdom
University of Murcia - Spain

The Academic Global Leader in
Risk and Decision Analysis
Palisade 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

In This Issue

» GWU Researchers Use
   @RISK for Debt Portfolios
   and Capital Investment

» Licensing Options

» Teaching Tips &

   Modeling a Risk Arbitrage

» Tech Tip
   Stress Analysis Command

» Featured White Paper
   On the Use of Ensemble
   Models for Credit Evaluation

» Recent School Adoptions

» About Palisade and the
   DecisionTools Suite

Keep in Touch

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2013 Palisade Risk Conferences
The 2014 Risk Conferences are "must attend" events for quantitative risk and decision analysis professionals. Join us for an intensive day of software training presented by Palisade trainers and consultants, and real-world case studies presented by industry experts.
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EMEA & India
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9-10 October
Sandton Convention Centre
Johannesburg, South Africa
27-29 October 2014
Amsterdam, Netherlands

» Live Web Training

Project Risk Assessment
using @RISK

5 - 6 August, 2pm-6pm ET

Decision-Making and Quantitative Risk Analysis
using @RISK

4 - 5 Sept, 1pm-5pm ET
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Decision-Making and
Quantitative Risk Analysis
using DecisionTools Suite

20-21 Oct, 9am-1pm ET
3-4 Nov, 9am-1pm ET

Trial Versions

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