Stochastic Balance Simulation

We know that forecasts based on average values are on average wrong. In addition deterministic models will miss the important dimension of uncertainty – that gives both the different risks facing the company and the opportunities they produce.

The fallacies of Scenario analysis

Scenario analysis is often used in company valuation – with high, low and most likely scenarios to estimate the value range and expected value – but do they give correct answers?

Glossary: Statistics

Certain or Uncertain

You may know the values your variables will take in the time frame of your model — they are certain, or what statisticians call “deterministic”. Conversely, you may not know the values they will take —…

The weighted average cost of capital

The weighted cost of capital (WACC) and the return on invested capital (ROIC) are the most important elements in company valuation, and the basis for most strategy and performance evaluation methods.

Risk and Monte Carlo simulation

Risk, when does it occurs? Whenever the outcome of a situation is not 0 or 1 you have uncertainty or risk.