The Tank, The Volkswagen, and the Neural Network

Six years ago when Dale Addison was speaking to a group of engineers and trying to pitch "artificial intelligence"–meaning neural networks someone in his audience asked him if it was true that a neural network had once mistakenly classified a T-62 tank as a Volkswagen.  Although the incident had occurred years before, Addison seems to […]

Where the Wild Things Are and Risk Assessment

Over the past three years I’ve been tracking an uptrend in risk analysis in what might seem an unlikely field, wildlife conservation.  But on further thought, this makes perfect, straightforward sense. At-risk animal populations could use some analytical help sorting out the live-or-die questions.    The first benchmark occurred when the World Conservation Union began […]

Rethinking Monte Carlo Simulation for Retirement Planning

A recent article entitled “When Monte Carlo analysis meets a black swan” in Investment News addresses the criticisms Monte Carlo simulation has received for “missing the meltdown.”  The author, Moshe A. Milevsky , notes that people typically seek a single number “answer” from a Monte Carlo simulation, such as the probability of meeting a single […]

Using Named Ranges in Excel: Some Comments

An earlier blog on Best Practice Principles in Excel Modelling generated quite some interest, as well as demand for more details on some of the points made, especially those concerning the use of named ranges risk asssessment models in Microsoft Excel. In the earlier posting, I had simply stated that (in my opinion): “Named ranges […]

There’s Risk Analysis and Then There’s More Risk Analysis

It must be that all the gloom in the financial sector is bringing out the gallows humor in me, because I had to laugh at this follow up on the "war games" stress testing in the British banking sector. First the Financial Times reported that risk analyses stress tests applied by regulators to British banks […]

Don’t Blame the Math

A recent article in Bank Investment Consultant criticized the risk analysis method of Monte Carlo simulation for not taking into account extreme events like the stock market crash. According the article, a Morningstar executive states that the “bell-shaped curve that Monte Carlo simulations use” artificially assigns the probability of what happened as zero.  Furthermore, the […]