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Ahmed Elshahat

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  1. Ahmed Elshahat

  2. ORACLE’s CB • Predictive Modeling Software; • Oracle’s Crystal Ball (CB) is a leading spreadsheet software suite for; • Stochastic modeling • Forecasting • Simulating • Optimizing 1/6

  3. Outline 2/6

  4. Capabilities • Integrating uncertainty into financial models. • Risk Analysis & Risk Management (VaR, CVaR) • Monte Carlo Simulation & Forecasting • Fitting distribution to historical Data • Stochastic Capital Budgeting techniques • Stochastic Optimization (Portfolio construction) • White noise, RW, RW with drifts, GBM, MR. • Real Options Analysis (ROA tool). 3/6

  5. CB Model • Let’s consider constructing a portfolio using the following 4 asset classes • Large-Company Stocks – LCS • Small-Company Stocks – SCS • Corporate Bonds – CB • US Gov Bonds – USGB • The annual rates of return % for these 4 assets, for the period 1926-2008 are saved in the excel file “OptQuest”, in the worksheet named “Data”. 4/6


  6. Start at a random point on the landscape (take a random guess). Walk a small distance in some arbitrary direction. If you have walked to a new point that is higher, stay and repeat step 2. If your new point is lower, go back to your original point and try again. Hill Climbing Algorithm 6/6