It uses the cash flows<\/strong> by means of a mathematical model in a repetitive way, establishing probability distribution of project yields.<\/p>
\n
\n Simulation can be one more tool among those used by the FINANCIAL DIRECTOR<\/strong> for making both investment and financing decisions.<\/p>
\n
\n Simulation performance provides an excellent basis for decision making, as the decision maker can consider a continuum of risk-return alternatives rather than a single point estimate.<\/p>
\n
\n The different simulation methods<\/strong> to analyze investment projects<\/strong> are normally based on the analysis of income and expenses related to the project, taking into account when they are actually received and delivered, that is, on the cash flows<\/strong> obtained in said project. .<\/p>
\n
\n The Monte Carlo method was named after the principality of Monaco for being the capital of gambling, by taking a roulette wheel as a simple random number generator.<\/p>
\n
\n The objective<\/strong> of this method is not to provide decisions but to support their decision-making.<\/p>
\n
\n The simulation of the Monte Carlo method is a technique that allows carrying out the valuation of investment projects<\/strong> considering that one, or several, of the variables used to determine the net cash flows are not certain variables, but can take on several values.<\/p>
\n
\n It is therefore a technique that allows risk to be introduced<\/strong> in the valuation of investment projects.<\/p>
\n
\n It is a numerical technique whose application allows calculating probabilities<\/p>
\n
\n Define variables, propose scenarios, applicable in finance<\/p>
\n
\n It does not provide the solution but data that serves as support for decision making<\/p>
\n\r\n It is a technique that allows to analyze sequential decisions based on the use of results and associated probabilities.<\/p>
\n
\n Decision trees are diagrams that are intended to show the range of possible outcomes<\/strong> and subsequent decisions<\/strong> made after the initial decision.<\/p>
\n
\n In the field of artificial intelligence<\/strong>, it can be said that the decision tree is given by a database, on which diagrams of logical constructions are built, very similar to rule-based prediction systems, which serve to represent and categorize a series of conditions that occur successively to solve a problem.<\/p>
\n
\n One of the most useful aspects of decision trees is that they force you to consider as many possible outcomes of a decision as you can imagine.<\/p>
\n
\n One drawback of using decision trees is that subsequent outcomes, decisions, and payoffs will be largely based on expectations.<\/p>
\n\r\n Financial Management. Financial Intelligence in Business Management<\/strong>.<\/p>
\n
\n “Financial direction. Financial Intelligence in Business Management<\/em>“Prentice Hall Publishers. 2\u00aa Edici\u00f3n. 2006. D\u00edez L, and L\u00f3pez Pascual, J. ISBN 978-84-8322-351-2.<\/p>
\n","protected":false},"excerpt":{"rendered":"
Simulation in investment decisions.
SIMULATION is a …<\/p>\n","protected":false},"author":3,"featured_media":2886,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"iawp_total_views":287,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31],"tags":[],"class_list":["post-2921","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-education"],"acf":[],"yoast_head":"\n![\"\"](\"https:\/\/i0.wp.com\/www.joaquinlopezpascual.com\/wp-content\/uploads\/2022\/02\/2-DECISIONES-DE-INVERSION-1.jpg?resize=100%2C150&ssl=1\")
<\/figure>
\n
\nMAIN SIMULATION METHODS<\/h2>
\n
\n
![\"\"](\"https:\/\/i0.wp.com\/www.joaquinlopezpascual.com\/wp-content\/uploads\/2022\/02\/2-DECISIONES-DE-INVERSION-2.jpg?resize=1024%2C564&ssl=1\")
<\/figure>
\n\r\nMONTE CARLO METHOD<\/h2>
\n
\n
What is the Monte Carlo method<\/h3>
\n
\n
Application of the Monte Carlo method<\/h3>
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\n
Disadvantages of the Monte Carlo method<\/h3>
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\n
DECISION TREES<\/h2>
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\n
![\"\"](\"https:\/\/i0.wp.com\/www.joaquinlopezpascual.com\/wp-content\/uploads\/2022\/02\/post-simul-10022022.png?resize=278%2C185&ssl=1\")
<\/figure>
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\n![\"\"](\"https:\/\/i0.wp.com\/www.joaquinlopezpascual.com\/wp-content\/uploads\/2022\/02\/2-DECISIONES-DE-INVERSION-4.jpg?resize=1024%2C636&ssl=1\")
<\/figure>
\n\r\n![\"\"](\"https:\/\/i0.wp.com\/www.joaquinlopezpascual.com\/wp-content\/uploads\/2022\/02\/2-DECISIONES-DE-INVERSION-5.jpg?resize=400%2C300&ssl=1\")
<\/figure>
\n
\nDecision trees: advantages<\/h3>
\n
\n
Decision Trees: Disadvantages<\/h3>
\n
\n
BASIC FINANCIAL TERMINOLOGY:<\/h2>
\n\n
FINANCIAL MANAGEMENT. To know more:<\/h2>
\n\r\n
TEACHING MATERIALS<\/h3>
\n\n
BOOKS<\/h3>
\n\n
FINANCIAL MANAGEMENT BOOK (a classic in Spanish and Latin American Universities)<\/h4>
\n
\n
![\"\"\/](\"https:\/\/i0.wp.com\/www.joaquinlopezpascual.com\/wp-content\/uploads\/2022\/01\/direccion_financiera_inteligencia_libro.jpg?resize=143%2C218&ssl=1\")
<\/figure>
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