The Certificate in Financial Modelling and Data Analysis website is now accessible through more URLs!! For convenience, the core site has been built on www.certfm.com. However, we have now added the other urls that may be easeir to remember! Depending on whether you prefer one or two l’s for “modeling” or “modelling” … you can …
URLS for The Certificate in Financial Modelling and Data Analysis Read More »
This is a follow-on article to the one “Key Stages in Modelling Risk and Uncertainty” and focusses on some of the challenges in the risk identification stage. Risk identification involves identifying which factors of a real-lie situation affect the outcome (whose risk we are trying to assess, such as the value of a contract, the …
The modelling of risk and uncertainty should involve several stages. These are summarised in this note. It is important to note that each stage is important, and if not performed adequately, the quality of the results, conclusions and decisions could be severely affected to the point that the analysis is wrong, very inaccurate or misleading. …
One the most important features of @RISK is the ability to embed Excel macros within the simulation. That is, for a macro the be run at every iteration of a simulation. If one has a model that requires a macro to be run whenever the model’s input values are changed, then this functionality will be …
The IRR rule can also be misleading or inapplicable if the cash flow profiles change sign and if one relies on the default settings for the Excel IRR function. Consider a “base case” project where one could invest $100 this year to earn $120 next year (cash profile -100, 120), so that the IRR is …
The use of the internal rate of return in decision-making can be rather subtle and may even be misleading. For example, the decision rule: “For independent projects, accept the project if the IRR is above the required rate of return” is often stated as the core rule. However, the following demonstrates the general principle that …
Some Challenges in Using IRR in Decision Support (Part I) Read More »
