Part 2. MM4XL Tools > 1. Strategic Tools > Risk Analyst > 4. Functions > 3. Distribution Functions > mmLOGNORMAL(Mean, StDeviation)

Risk Analyst

mmLOGNORMAL(Mean, StDeviation)

Example

=mmLOGNORMAL(1, 1) can equal 0.370659727

Application

This distribution is used to model the product of two or more independent variables. This situation is quite frequent in nature, such as the volume of a natural gas reservoir or river flow rates. It also applies to things like real estate values, income size, or bank deposits.

How to use

To model the product of several independent events, such as monthly sales: Assume that each customers purchase is the product of many factors, such as salary times a weather factor times a mobility factor times several other independent factors. If there are not too many customers with a lognormal sales shape, the company sales will also tend to be lognormal. Otherwise, with many lognormal customers, company sales will tend to be normally distributed due to the central limit theorem. The formula below can help to model the sales of a not too large pool of customers with average sales of $50000 and standard deviation $10000:

=mmLOGNORMAL(50000, 10000)

Copy the formula above in 100 cells. You will find that the simulated values will be produced, roughly speaking, in the range $30000-$90000 in accordance with the Mean sales and Standard deviation of the sampled pool of clients. However, the formula above returns a value expressed on the metric unit, so there is not need to use logarithmic values in the formula. For your information, the formula below transforms a logarithmic value in metric unit:
=EXP(mmLOGNORMAL(100, 20)

Technical profile

Type Continuous distribution.
Syntax =mmLOGNORMAL(Mean, StDeviation)
Domain  Monte Carlo Simulation Software: Management Process Risk Analysis; generates positive numbers only
Mode  Monte Carlo Simulation Software: Management Process Risk Analysis
Parameters Mean = m > 0
StDeviation = s > 0
Remarks If any argument is nonnumeric mmLOGNORMAL returns the #VALUE! error value.
Relationships It is related to the Normal variate.
Graphs
mmLOGNORMAL(1, 1) mmLOGNORMAL(10, 1)
 Monte Carlo Simulation Software: Management Process Risk Analysis  Monte Carlo Simulation Software: Management Process Risk Analysis
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