Presenter: Dhara Shah
Event: NACVA and GACVA’s Around the Valuation World International
Presentation Title: Introduction and Applications of Monte Carlo Simulation in Valuation
We are proud to announce that Ms. Dhara Shah, Vice President, of Knowcraft Analytics, has developed a proprietary tool tailored for performing Monte Carlo Simulations directly within Excel for the most commonly used distributions and generating both summary metrics and individual simulation results as output. Ms. Shah recently presented this innovation at NACVA and GACVA’s Around the Valuation World International.
How is this tool superior to the other paid or free software available in the market?
Advantages of the tool
The tool is much faster as compared to using other simulation tools and plugins. It is able to run the simulations and produce the results in a fraction of the time required by the simulation software.
Since the tool is built entirely in Excel with VBA and Lambda functions, no software is required to be installed in your system. The tool just requires the user to install a plug-in to run, which is a one-time activity. Since no separate software is required, #NAME? errors do not appear nor do annoying pop-ups to buy a paid version of the software.
The user has limited access while using the free versions of simulation tools. For instance, a few simulation tools do not offer the functionality of looking at or saving individual output for the simulations in their free versions. Our proprietary tool has that functionality covered. The tool is designed to be simple, user-friendly, and easy to audit.
Custom functions used in the tool
Binomial: Simulates binomial (Yes/No) distribution. Requires one argument, which reflects the probability of an event happening.
Lognormal_Standard: Simulates the standard lognormal distribution. The function requires three arguments: i) Risk-free rate, ii) Annual volatility, and iii) Time period or Step. The function can be multiplied with the starting/prior period asset/stock/equity value to generate the simulated value for the asset/stock.
Triangular: Simulates the triangular distribution. Requires three arguments: (i) Min (i.e., lower bound), (ii) Most Likely, and (iii) Max (i.e., upper bound). These are similar to generating input variables with simulation software.
To watch the presentation, click on the following link: Link
To learn more about our in-house tool, please click on the following button.
