Risk Modeling

Risk Modeling (T105) is a 1-day course that applies FAST modeling design and construction techniques. Each participant will be taught to apply these techniques as he or she overlays risk and uncertainty on to a simple financial model. The existing deterministic inputs to the model will be replaced with their probabilistic counterparts in a step-by-step modeling approach that shows how the added complexity that risk introduces can be managed and understood.

The course starts with an introduction to how risk and uncertainty can be represented using probability functions and shows how a register of risks can be introduced into an existing financial model in a systematic and robust way. Participants learn how to implement and control risks and uncertainties to financial parameters, money and time. They also learn how relationships between risk inputs can be represented and controlled, the effect those relationships have on the model outputs and how those outputs can be presented.

Risk modeling is aimed at those people who need to build, modify and run probabilistic risk models.

Risk Modeling is aimed at those people who need to build and run probabilistic risk models. For those with no risk modeling experience, this course provides a solid introduction to real-world risk modeling. For experienced modelers, this course will help the quality and productivity of your risk modeling.

Risk Modeling is a hands-on course. Attendees follow the instructor, while building their own risk models on their own computers; in this way they immediately practice what they have been taught.

The course explains basic probability and statistics as they are needed, but the main aim of the course is to teach and practice risk modeling skills that produce risk models that are are as flexible, accurate, structured, and transparent as the underlying deterministic model.

The course covers elements of risk model design, Excel techniques, and some basic probability and statistics principles. Participants will gradually overlay risk onto an existing model in robust and transparent ways, and understand how the risk has affected the model’s outputs. The approach will be to produce a functioning risk model early on and add complexity and functionality to the model as the course progresses.

The one-day course includes specific sessions focused on:

• Basic principles: What risks are? Why do probabilistic risk analysis; some basic probability and statistics; ; building, running and understanding a simple risk model.
• Adding risk inputs; output histograms and s-curves; risk registers and what they should contain; different types of risk and how they can be modeled; switching risks on and off.
• Controlling the simulation; relationships between risk inputs; significance, correlation and Tornado charts.
• Modeling time risks and understanding the boundaries of the model.

Attendees should have a good understanding of MS Excel, preferably as a result of attending the T101 FAST Modeling Skills course, and a basic understanding They will also need to bring a laptop with them, ideally one they are accustomed to using, with a Microsoft Windows operating system and Microsoft Excel loaded with Analysis Toolpak available . Laptops may be rented from Financial Mechanics for an additional charge.