Introduction to Probabilistic Modeling Probabilistic Modeling

YOUR LINK HERE:

http://youtube.com/watch?v=OvLatB0ax1Y

Introduction to Probabilistic Modeling • Part of the lecture series Probabilistic Modeling : • https://nickderobertis.github.io/fin-... • Full Course Website: • https://nickderobertis.github.io/fin-... • • Notes • -------- • Probability is a key concept for financial models as it related to risk • The base result from a deterministic model only gives a single answer, but does not consider the probability distribution of the result • E.g. your model could predict a positive NPV from a project, but through probabilistic modeling you determine that there is a 98% chance the NPV is negative. Do you still want to take the project? This is important information to know when making that decision. • We discuss three techniques in this course that take advantage of probability theory: scenario modeling, internal randomness, and Monte Carlo simulation • Scenario modeling and Monte Carlo simulation are also methods of exploring the parameter space, just like sensitivity analysis • Internal randomness is useful for when the probability is so core to the model that it should be built in from the beginning, rather than extending the base model to add probability

#############################

New on site