Risk Simulation | Overlay Results

Multiple simulation output variables can be compared at once using the Overlay Results tab (Figure 5.5 shows the DCF module’s default example’s results after running the Simulate All Options at Once selection, and then going to the Overlay Results, choosing the first two Project’s NPV and selecting PDF Curve Overlay). Simply check/uncheck the simulated outputs you wish to compare and select the chart type to show (e.g., S-Curves, CDF, PDF). You can also add Percentile or Certainty lines by first selecting the output chart, entering the relevant values, and clicking the Update button. As usual, the generated charts are highly flexible in that you can modify the charts using the included chart icons. Some additional tips include:

  • Typically, S-curves (CDF) curves are used in overlay analysis, when comparing the risk profile of multiple simulated forecast results. You can also change the chart into a PDF curve (see Figure 5.5) to see how one project stacks up against another (with central tendencies showing the expected returns, the width showing the potential uncertainties and risks, the directional skewness of each project, the excess fatness in the tails or peakedness in the distribution, etc.).
  • Note that the more simulation trials you run, the smoother the chart looks. Figure 5.5 shows only a 100-trial run to illustrate, hence the jagged line charts.
  • Refer to Dr. Johnathan Mun’s Modeling Risk, Third Edition,for more details on interpreting forecast distribution charts, statistical moments in the forecast charts, S-curves, PDFs, CDFs, and other associated charts.
  • You can also view the Basics of Project Economics Analysis in the Knowledge Center for quick details on interpreting S-curve
error: Content is protected !!