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Risk Solver Engine provides a wide range of
statistics and risk measures, computed for each output of
interest across the trials of a Monte Carlo simulation.
You can use measures of central tendency, measures of variation or
dispersion, and quantile measures, to assess almost any
output in your model.
Risk Solver Engine provides several measures of
central tendency:
 | PsiMean, the average of all the values |
| PsiPercentile for the median or 50th percentile |
| PsiMode, the most frequently occurring single
value |
Risk Solver Engine provides several standard measures of
variation:
| PsiVariance, which describes the spread of the
distribution of values |
| PsiStdDev for standard deviation, the
square root of variance |
| PsiSkewness, which describes the asymmetry
of the distribution of values |
| PsiKurtosis, which describes the
peakedness of the distribution of values |
| PsiMin, PsiMax, and
PsiRange for the minimum and maximum values, and the difference
between them |
Risk Solver Engine also provides several
risk measure functions that are most often used in quantitative
finance applications, but may be used in any model:
| PsiAbsDev for
‘MAD’, which measures absolute deviations from the mean |
| PsiSemiVar
for semivariance or lower partial moment, which measures and weights
negative deviations from the mean |
| PsiSemiDev for semideviation,
the square root of semivariance (qth root for the lower partial
moment) |
PsiSemiVar and PsiSemiDev are useful in situations where
‘upward’ variation -- for example, higher stock prices or increased
profits -- is desirable, but ‘downward’ variation -- lower prices or
losses -- is undesirable.
To get a complete grasp
of the range of outcomes, it’s essential to look at quantile
measures, such as percentiles and Value at Risk, in addition to
measures of central tendency and variation. Quantile measures allow
you to answer questions such as ‘How much money might we lose, with
5% or 10% probability?” or “What is the probability that we’ll make
at least $100,000?” based on your simulation model. Risk Solver
Engine provides:
| PsiPercentile, which provides percentile values
from 1% to 99% |
| PsiTarget, which returns the proportion of values
less than or equal to a target value |
| PsiBVaR, which measures
standard (‘Basel’) Value at Risk |
| PsiCVaR, which measures
Conditional Value at Risk |
Every Monte Carlo
simulation uses a sample of the possible values of your uncertain
variables; hence any statistic resulting from the simulation
involves some degree of sampling error. For the mean and standard
deviation of an output value, Risk Solver Engine provides functions
that help you assess this error, and estimate the range or interval
in which you can be confident that the true mean or standard
deviation lies, at a confidence level that you specify:
| PsiMeanCI,
which returns a confidence interval for the mean |
| PsiStdDevCI,
which returns a confidence interval for the standard deviation |
| PsiCITrials, which returns the number of simulation trials needed to
obtain a confidence interval of a given size, at a given confidence
level |
Back to Risk Solver Engine Product
Overview
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