Textbooks that touch upon technology-related subject matter face the challenge of topics becoming outdated by the time the books go to press. Darren O’Connell found this type of content stagnation to be readily evident in how risk analysis is taught in institutes of higher learning. In fact, he found risk analysis lessons were not only behind the times, but not nearly as accurate as more current methods of calculating risk.
For his doctorate research at Curtin University of Technology (Australia), O’Connell compared the traditional method of teaching risk through the use of normal distributions, to a probabilistic method, featuring @RISK, StatTools and RISKOptimizer. Having utilized Palisade solutions professionally for financial risk analysis, O’Connell was convinced that new technologies offered more efficient and accurate means of teaching risk. To illustrate his point, O’Connell presented methods of modeling the stochastic price process of two illiquid securities under uncertainty by application of probabilistic techniques, in order to manage price risk within a Value-at-Risk (VaR) framework. To do this, he utilized multiple Palisade solutions. His research discovered that the newer methods were not only more accurate, but they were more user-friendly and cost-efficient.
“The benefits gained from using Palisade software were the ability to select probability distributions from a large universe, which opened up greater statistical modeling possibilities that develop more realistic solutions to problems encountered by industry practitioners,” reports O’Connell. “The seamless integration of Palisade products into the Excel development environment is a huge advantage, and allows practitioners to learn to use DecisionTools as if it’s a natural extension of learning Excel. This in turn reduces training and system development costs, because risk departments are not investing in expensive / extensive proprietary system solutions.”