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The Integrated Financial Model and the use of Growth Patterns in Monte Carlo simulation Risk Analysis

Author

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  • Savvakis C. Savvides

    (Visiting Lecturer, John Deutsch International Executive Programs, Queens University, Canada.)

Abstract

Through this paper the author highlights the importance of constructing an integrated financial model and in using growth patterns in projecting the key parameter projections to generate consistent and meaningful scenarios during a Monte Carlo simulation risk analysis application and to avoid and contain the correlation problem. The Integrated Financial Model© by Savvakis C. Savvides was created and tested after many years of expertise of the author in corporate lending and project finance as well as from teaching investment appraisal and risk analysis and the development of several related software. It is argued that to apply Monte Carlo Simulation Risk Analysis in a meaningful manner and to enhance the decision-making process the methodology should not be used “as a toy†but rather in a thoughtful manner that takes into consideration all aspects of a prudently constructed business plan and as this is manifested through an integrated financial model. The use of growth pattern functions for the key risk variables is essential so as to contain the correlation problem and for the simulation to be based on consistent and realistic scenarios.

Suggested Citation

  • Savvakis C. Savvides, 2024. "The Integrated Financial Model and the use of Growth Patterns in Monte Carlo simulation Risk Analysis," Development Discussion Papers 2024-03, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:4615
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    References listed on IDEAS

    as
    1. Jenkins, G.P., 1998. "Evaluation of Stakeholder Impacts in Cost-Benefit Analysis," Papers 631, Harvard - Institute for International Development.
    2. Savvides, Savvakis C., 2000. "Market Analysis and Competitiveness in Project Appraisal," MPRA Paper 9796, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Market analysis; quantity demanded; elasticity of demand; project evaluation; market segmentation; market penetration.;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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