Finite Difference Method, Goal Seek, Sensitivity Analysis by Edu Pristine

Author of lecture Finite Difference Method, Goal Seek, Sensitivity Analysis

Edu Pristine

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... Rapshon method. "Optimization." Binomial Option Pricing. "Finite ...

... © Neev Knowledge Management -Pristine. 2. "What if you already know the result you want? And want to find out how to achieve that goal?" For example: You might know that you want to have a goal of having asaving of Rs. 20,000,000 by the time of retirement, what should be your saving per year? You have to achieve a 30 % gross margin in your P&L next year, what should be your ...

... input values for the formula and give them proper initial values. Create a formula for Goal Seek to use, to try, to reach the goal." Example: Suppose Pristine wants to purchase newoffice worth $50,000 five years from now Assuming that investments earn 5 % annual interes how much do we need to set aside every year to reach this goal? ...

... © Neev Knowledge Management - Pristine. 4. "Suppose that Pristine wants to introduce a new product Diagnostic FRM, and wants a margin of 30 % during the first year. It launches the product under theassumptions:" The sales during the year will be 600 units. "The average discount will be 40 %." The total fixed costs ...

... company's equity based on different values for each of the independent variables. © Neev Knowledge Management - Pristine. 2. "Sensitivity Analysis. Is a way to predict the outcome of a decision if a situation turns out to be different compared to the keyprediction Technique used to determine how different values of an independent variable will impact a particular dependent variable. To determine how changes in one variable will impact the target variable. Check on the set of assumptions. Used within specific boundaries that will depend on one or more input variables, such as the effect that changes in interest rates will have on a bond's price." Very useful when attempting to determine the impact the ...

... Subsets of each of the possibilities. Correlations and assign probabilities to the scenarios. Finally it would be in a position to "Consider how to distribute assets between asset types (i.e. asset allocation)." Calculate the scenario-weighted expected return (which figure will indicate the overall attractiveness of thefinancial environment)." Perform stress testing, using adverse scenarios. © Neev Knowledge Management -Pristine. 3. "Scenario analysis. Process of ...

... 4. "Manual Approach. The financial model is run for multiple inputs keeping track of all outputs For example, the return on portfolio." The price of the bonds can be calculated by changes in interest rate. "The change in stock price." Calculating the correlation between different asset classes. "Calculating the return. ...

... Generation using scenario manager." More functionality as compared to data-tables. "If the results are known, then what combination of input variables can be used to get those results, can also be automated in excel Goal Seek." Manipulate only one variable at a time to get to the desired output. "Not possible to save the state  Solver." More powerful tool than goal seek. "Can input constraints in the scenario." Possible to save the state ...

... © Neev Knowledge Management - Pristine. 6. "Excel gives options of varying the cells and generating scenarios, so that the process can be made easier. Data Tables." 1. variable data tables: where one of the variables can be varied "and 2 variable data tables (Where multiple variables can be varied). Scenario: Generation using scenario manager." More functionality as compared to data-tables. "If the results are known, then what combination of input variables can be used ...