chapter  5
Sharing workbooks
Pages 10

The principle of simulation is an extension of the Scenario approach, using many more trials than can be considered using that facility. Even so, it would be impossible to perform every possible combination of variables. In valuation terms the statistical expectation of a calculation may be described as the value multiplied by the probability of getting it. A distribution is a description of the possible values which a variable can take. Statisticians have developed many theoretical distributions of data, but one of the most commonly used is the Normal Distribution. The computer of course is ideal for this purpose and we can easily set it up to select a random number between two defined limits with the Randbetween function. The most appropriate graphical representation of our simulation is a histogram. It is therefore open for consideration that an opinion of value based on a simulation and including the statistical results.