Part 2. MM4XL Tools > 1. Strategic Tools > Risk Analyst > 1. How to run Risk Analyst > Model simulation

Risk Analyst

Model simulation

When the model is ready, with all input and output functions in place, it is time to let it roll!
In the main window of Scenario Manager click the button Simulation and the form below appears. There are three pages in this form: Iterations, Report and Sampling.

Page Iterations

In this page we define how many simulations to collect in a trial. The Number of simulations option is set by default to 100 and the maximum number is 60000, which is well beyond the need of most business models. 1000 simulations means that the model is updated 1000 times, each with a different set on input values. To change the number of simulations, simply type a number in the field or click on the small arrow on the right and select a different value from the list. Click the button Run simulation to start collecting data for the 1000 trials.

 Monte Carlo Simulation Software: Management Process Risk Analysis

What is the right number of trials? This is an interesting question, especially when dealing with large models. In general, the answer is many. However, models with many variables may require considerable time to iterate very many times. In such cases, it helps to know how many trials are needed to collect enough data to obtain a solid report. An answer to this question can be found with the help of the function mmOPTNUM, which is explained in the section Property Functions in this help chapter.

When the check box Show preview is checked, after the recording of data for the last simulation trial a window appears where you can preview (before printing to sheet) the results of the simulation. Refer to the section Report preview in this help chapter for more details concerning the preview option.

Sheet mode

The frame Sheet mode contains two important check buttons: Modal value and Random number.

Random numbers are the building blocks of simulation models. Nevertheless, they can be confusing when working with a sheet that keeps changing every time a little change is made. In order to not keep numbers rolling, the Sheet modal value option in the window above is set to active by default. This means that the functions show on sheet a value corresponding to the modal value of the distribution they refer to, and this value does not change when the sheet is recalculated. The mode of a Pdf changes only when the parameters of the distribution change.

When the Sheet mode option is set to Show random numbers and the sheet is recalculated (with F9 for instance) the Pdfs change their value because random numbers take a different value every time that F9 rules.

When running a simulation, the option selected in the Sheet mode frame does not affect the functioning of the simulation routine. Risk Analyst is able to work in both cases without requiring the intervention of the simulationist. Although rare, it can happen that after a simulation session with Risk Analyst, Excel ends in a different status than the original recalculation mode set by the user. Changing calculation mode manually can be done in Excel by selecting the menu Extra -> Option -> Recalculation and ticking either the checkbox Manual or Automatic.

There are distribution functions that can return an undefined mode. For instance, the Beta distribution can be bi-modal, the Integer Uniform can result in undefined, etc. In such cases Risk Analyst uses an approximation for the mode in order to show a number in the cell rather than text, which would compromise the result of all formulae in the model. For more information concerning undefined modes refer to the material on single Pdfs in this help chapter.

Page Sampling

This page helps when we want to print a defined quantity of random numbers according to a given distribution function. For instance, in the main tool window, in the field Output cell select an address on the sheet to start printing from. From the list box Distribution select the option you like and set the distribution parameters. Then click on the button Simulation and go to page Sampling, shown in the picture below. Type the quantity of random numbers you wish to print, or accept the default quantity, and click on the button Run simulation to finish the operation.

 Monte Carlo Simulation Software: Management Process Risk Analysis

During the simulation runs look in the lower left corner of the monitor. Short messages are displayed that indicate the operation being executed by Risk Analyst. There are cases when Risk Analyst becomes very busy, and these messages may help you understand what is happening.

 Monte Carlo Simulation Software: Management Process Risk Analysis

Random numbers can also be printed to sheet from the main window, with the difference that from the main window you cannot select in advance how many numbers to print but you can select a range of cells that will all be filled with random numbers. Moreover, random numbers printed from the main window are written in form of mmFUNCTION while random numbers from the Sampling page are in form of values.

Note that if you select more columns in an output range, the second and following columns will be filled with the same numbers printed in the first column.

Page Report

The default option for a Risk Analyst Report is set to Compact, as shown in the following form.

 Monte Carlo Simulation Software: Management Process Risk Analysis

When clicked, the Custom report option opens the window below (the selections refer to a Compact report). Simply check or uncheck the desired options. Click on the label Back.. to return to the previous page.

 Monte Carlo Simulation Software: Management Process Risk Analysis

One may wish to have the report printed to a new file (workbook). In this case you only need to check the option New workbook in the frame Report location. The default selection is in the active file. In both cases, each report is printed to a separate sheet, so the simulationist is not even required to select an output cell.

When the selection is made, click on the button Report to start printing the simulation results to sheet. The details concerning the single report options can be found in the section Interpreting results of this help chapter.

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