Applied Risk Analysis

Introduction; PART ONE: Risk Identification; CHAPTER 1: Beyond Uncertainty; A Brief History of Risk: What Exactly Is Risk?; Uncertainty Versus Risk; Why Is Risk Important in Making Decisions?; Dealing with Risk the Old Fashioned Way; The Look and Feel of Risk and Uncertainty; Five-Minute Industry Spotlight: ExperCorp; Questions; PART TWO: Risk Evaluation; CHAPTER 2: From Risk to Riches; Taming the Beast; The Basics of Risk; The Nature of Risk and Returns; The Statistics of Risk; The Measurements of Risk; Five-Minute Industry Spotlight: Farmland; Five-Minute Industry Spotlight: Environmental Protection Agency; Questions; CHAPTER 3: A Gentleman's Guide to Model Building; Document the Model; Separate Inputs, Calculations, and Results; Protect the Models; Make the Model User-Friendly: Data Validation and Alerts; Track the Model; Automate the Model with VBA; Appendix A Primer on VBA Modeling and Writing Macros; Exercises; PART THREE: Risk Quantification; CHAPTER 4: On the Shores of Monaco; What Is Monte Carlo Simulation?; Why Are Simulations Important?; Comparing Simulation with Traditional Analyses; Using Crystal Ball and Excel to Perform Simulations; Five-Minute Industry Spotlight: Colorado School of Mines; Five-Minute Industry Spotlight: Hewlett-Packard; Appendix Simulation; Questions; CHAPTER 5: Peering into the Crystal Ball; The Basics of Crystal Ball Software; Getting Started with Crystal Ball Software; The Simulation Environment; Creating a Simulation; Interpreting the Simulation Results; Five-Minute Industry Spotlight: TRW; Five-Minute Industry Spotlight: DuPont Merck; Questions; CHAPTER 6: Pandora's Tool Box; Tornado and Sensitivity Tools in Simulation; Correlating and Fitting a Distribution Plus Precision Control; Precision Control; Bootstrap Simulation; Two-Dimensional Simulation; Decision Tables; Five-Minute Industry Spotlight: 3M; Five-Minute Industry Spotlight: Deloitte & Touche Consulting; Appendix Goodness-of-Fit Tests; Questions; PART FOUR: Industry Applications; CHAPTER 7: Extended Business Cases I: From Pharma to Black Gold; Case Study: Pharmaceutical and Biotech High Precision Quantitative Deal Structuring in the Biotechnology and Pharmaceutical Industries; Case Study: Oil and Gas Production and Exploration; Five-Minute Industry Spotlight: Sierra Systems; Five-Minute Industry Spotlight: Motorola; PART FIVE: Risk Prediction; CHAPTER 8: Tomorrow's Forecast Today; What Is Forecasting?; The Nature and View of Forecasting; Five-Minute Industry Spotlight: Hewlett-Packard; Five-Minute Industry Spotlight: SunTrust Bank; Questions; CHAPTER 9: Using the Past to Predict the Future; Time-Series Forecasting Methodology; No Trend and No Seasonality; With Trend But No Seasonality; No Trend But With Seasonality; With Seasonality and With Trend; Regression Analysis; The Pitfalls of Forecasting: Outliers, Nonlinearity, Multicollinearity, Heteroskedasticity, Autocorrelation, and Structural Breaks; Other Technical Issues in Regression Analysis; Introdu