This chapter also introduces the novice risk analyst to the Risk Simulator software for performing Monte Carlo simulation, stochastic forecasting, portfolio optimization, and general statistical analysis, where a 30-day trial version of the software is included in the book s DVD. This section starts off by illustrating what Risk Simulator does and what steps are taken in a Monte Carlo risk-based simulation, as well as some of the more basic elements in a simulation analysis. This chapter then continues with how to interpret the results from a simulation and ends with a discussion of correlating variables in a simulation as well as applying precision and error control. Because software versions with new enhancements are continually released, review the soft-ware s user manual and the software download site (www.realoptionsvaluation.com) for more up-to-date details on using the latest version of the software. For more technical details on using Risk Simulator, see Modeling Risk: Applying Monte Carlo Simulation, Real Options Analysis, Stochastic Forecasting, and Portfolio Optimization (Wiley, 2007) also by the author.

Risk Simulator is a Monte Carlo simulation, forecasting, optimization, and statistical analysis software. It is written in Microsoft .NET C# and functions together with Excel as an add-in, and it can also be used as an OEM or integration into other existing software and database products. Risk Simulator is also compatible and often used with the Real Options SLS software introduced in Appendix 1. The different functions or modules in both software applications are briefly described...