@RISK Quick Tips: Use of RiskTheo to Represent Distributions as Discrete Ones

@RISK, risk analysis software using Monte Carlo simulation, has many powerful features that help you create powerful models for decision making under uncertainty.

For example, you can use the RiskTheo function in @RISK to determine the parameters of a discrete distribution based on a continuous one. In this example, the RiskTheo functions of @RISK work out the P10, P50, and P90 percentiles of a continuous distribution (in this case the LogNormal), and the Mean and Standard Deviation of a RiskDiscrete distribution which has these X-values and some assumed probabilities (or weights). It then uses Excel’s Solver to work out the probabilities required so that the discrete distribution based on these percentiles and probabilities would have the same mean and standard deviation as the continuous distribution.

» Download the example: CtsToDiscrete.xls
» See "Uses of the RiskTheo functions in
   @RISK to match distributions
"
 » See "DMAIC Failure Rate using RISKTheo" for a
    Six Sigma application of the RISKTheo function

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