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Incorporating Explanatory Variables into Risk Simulation Models


  • Michael Backus

    () (Wells Fargo Glennallen)


A handful of articles have already been written describing how Excel can be used to model financial uncertainty via Monte Carlo simulation. Unfortunately, to date the methods described have been useful only for education purposes. This article describes how to incorporate explanatory variables into ones models, giving Excel users the ability to model complex scenarios on a level comparable to programs designed specifically for simulation purposes such as @Risk and Crystal Ball. And best of all, it is extremely educational and a practical real world skill.

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  • Michael Backus, 2005. "Incorporating Explanatory Variables into Risk Simulation Models," Computers in Higher Education Economics Review, Economics Network, University of Bristol, vol. 17(1), pages 14-16.
  • Handle: RePEc:che:chepap:v:17:y:2005:i:1:p:14-16

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    References listed on IDEAS

    1. Michael P. Murray, 1999. "Econometrics Lectures in a Computer Classroom," The Journal of Economic Education, Taylor & Francis Journals, vol. 30(3), pages 308-321, January.
    2. O. Homer Erekson & Prosper Raynold & Michael K. Salemi, 1996. "Pedagogical Issues in Teaching Macroeconomics," The Journal of Economic Education, Taylor & Francis Journals, vol. 27(2), pages 100-107, April.
    3. Peter E. Kennedy, 2001. "Bootstrapping Student Understanding of What is Going on in Econometrics," The Journal of Economic Education, Taylor & Francis Journals, vol. 32(2), pages 110-123, January.
    4. John J. Siegfried & Michael K. Salemi, 1999. "The State of Economic Education," American Economic Review, American Economic Association, vol. 89(2), pages 355-361, May.
    5. W. Lee Hansen & Michael K. Salemi & John J. Siegfried, 2002. "Use It or Lose It: Teaching Literacy in the Economics Principles Course," American Economic Review, American Economic Association, vol. 92(2), pages 463-472, May.
    6. Solow,Robert M., 1998. "Monopolistic Competition and Macroeconomic Theory," Cambridge Books, Cambridge University Press, number 9780521626163, March.
    7. William E. Becker, 1997. "Teaching Economics to Undergraduates," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1347-1373, September.
    8. Frank Hahn & Robert Solow, 1997. "A Critical Essay on Modern Macroeconomic Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258154x, July.
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