ModelRisk (using Monte Carlo simulation)
Spreadsheet risk modeling within Microsoft ExcelDownload 15 day trial
ModelRisk: Monte Carlo simulation software that makes quantitative risk analysis intuitive.
ModelRisk is a Monte Carlo simulation Excel add-in that allows the user to include uncertainty in their spreadsheet models. ModelRisk has been the innovation leader in the marketplace since 2009, being the first to introduce many technical Monte Carlo method features that make risk models easier to build, easier to audit and test, and more precisely match the problems you face.
A ModelRisk user replaces uncertain values within their Excel model with special ModelRisk quantitative probability distribution functions that describe the uncertainty about those values. ModelRisk then uses Monte Carlo simulation to automatically generate thousands of possible scenarios.
At the end of the Monte Carlo simulation run, which typically takes a few seconds, the results are displayed in a variety of graphical and statistical formats that will tell you things like:
- What is the probability we will come under budget?
- Which investment gives me the greatest return for a given level of risk?
- How much capital do we need to be 95% sure of having enough for the project?
- Which component configuration give me the greatest chance of achieving a certain operation time before a failure occurs?
- How much do we need to hold in reserve to be 90% sure of covering the risks in our business?
- How likely are we to meet our sales forecast?
ModelRisk features overview (8:46)
- ModelRisk Standard provides advanced Monte Carlo simulation in Excel.
- ModelRisk Professional adds 'objects' to ModelRisk Standard that greatly extend and simplify what you can model, as well as optimization and much more.
- ModelRisk Industrial adds a range of advanced features to the Professional version that help solve common, more complex problems specific to various industries.
What problems can be solved by ModelRisk and Monte Carlo simulation within Micosoft Excel?
In the same way that Excel is used for many different types of analysis, ModelRisk is used to assess the uncertainty in the numbers produced by the Excel model. Users have performed risks analyses with ModelRisk in a vast range of fields, to give answers to a huge range of questions, so summarizing what it can be used for is a difficult task, but here are the most common applications we have seen:
- Financial risk analysis – determining the amount to save in a pension fund to give a high level of assurance of a certain income
- Investment risk analysis – determining the optimum portfolio for a given risk appetite (ModelRisk incorporates the World’s most powerful stochastic optimizer to help achieve this)
- Engineering risk analysis – assess the reliability of a system (ModelRisk incorporates many special lifetime distributions)
- Trading risk analysis – determine the risk:return profile of a set of financial instruments (ModelRisk incorporates a very wide range of return distributions, time series models and correlation structures for this)
- Cost estimation risk analysis – determining the cost uncertainty of a project, perhaps with a profile over time
- Discounted cashflow risk analysis – determining the expected return of an investment, or the probability of achieving a particular EBITDA or IRR
- Epidemiology risk analysis – assessing the risk of introduction or spread of a disease, or the sufficiency of resources to handle an epidemic
- Natural disaster risk analysis – determining the number of ambulances and aircraft needed to be available to evacuate hospitals faced with an imminent tornado.
Interested in a trial of ModelRisk?Download now
ModelRisk incorporates virtually every probability distribution used in any field. Whilst you may well only need a few of them, depending on the particular application you need ModelRisk for, you are almost guaranteed to find the ones that are commonly used in your field of work.
ModelRisk is offered in a variety of licensing options. It can be installed across a network with a limited number of seats, offering a cost-effective solution when you have many occasional users. It can be installed on a single computer too. ModelRisk licenses are also available for different durations, and a two-week demo license is available free-of-charge if you are unfamiliar with the product.
ModelRisk offers a wide range of unique modelling tools designed to help simplify risk analysis model building. These risk management software tools can reduce a model to just a few cells, where a simple product would require perhaps thousands of cells to do the same calculation. This has the added benefit of making the models run thousands of times faster too! Examples are aggregate tools (determining the total of a random number of random variables), extreme value tools (what could be the largest value observed).
Select a cell with a ModelRisk function, click the View Function icon, and ModelRisk will immediately open a visual display of precisely what that function is doing. Click on a help icon and the help file opens explaining the function in detail, navigating to one of over a 1000 subjects within the help file. Input an invalid value in a ModelRisk function and the function returns an explanation of the error. You can also use all of Excel’s auditing tools with ModelRisk functions.
Highlight feature: Risk management reporting
This Monte Carlo simulation software tool offers a unique method for displaying and sharing the results of your risk analysis spreadsheet models. Once a simulation run is complete, a separate application called the Results Viewer opens. This application shows lists the different random inputs and outputs of the model, and the different simulations that have been run (one typically runs multiple simulations to compare different possible options).
This application shows lists the different random inputs and outputs of the model, and the different simulations that have been run (one typically runs multiple simulations to compare different possible options).