Advanced Analytical Models is a large collection of advanced models with a multitude of industry and domain applications. The book is based on years of academic research and practical consulting experience, coupled with domain expert contributions. The Modeling Toolkit software that holds all the models, Risk Simulator risk simulation software, and Real Options SLS software were all developed by the author, with over 1,000 functions, tools, and model templates in these software applications. The trial versions are included in the accompanying DVD. The applications covered are vast. Included are Basel II banking risk requirements (credit risk, credit spreads, default risk, value at risk, etc.) and financial analysis (exotic options and valuation), risk analysis (stochastic forecasting, risk-based Monte Carlo simulation, optimization), real options analysis (strategic options, decision analysis), Six Sigma and quality initiatives, management science and statistical applications, and including everything in between, such as applied statistics, manufacturing, operations research, optimization, forecasting, and econometrics.
This book is targeted at practitioners who require the algorithms, examples, models, and insights in solving more advanced and even esoteric problems. This book does not only talk about modeling or illustrate basic concepts and examples; it comes complete with a DVD filled with sample modeling videos, case studies, and software applications to help you get started immediately. In other words, this book dispenses with all the theoretical discussions and mathematical models that are extremely hard to decipher and apply in the real business world. Instead, these theoretical models have been coded up into user-friendly and powerful software, and this book shows the reader how to start applying advanced modeling techniques almost immediately. The trial software applications allow you to access the approximately 300 model templates and 800 functions and tools, understand the concepts, and use embedded functions and algorithms in your own models. In addition, you can get run risk-based Monte Carlo simulations and advanced forecasting methods, and perform optimization on a myriad of situations as well as structure and solve customized real options and financial options problems.
Each model template that comes in the Modeling Toolkit software is described in this book. Descriptions are provided in as much detail as the applications warrant. Some of the more fundamental concepts in risk analysis and real options are covered in the author’s other books. It is suggested that these books, Modeling Risk (Second Edition): Applying Monte Carlo Simulation, Real Options Analysis, Stochastic Forecasting, and Portfolio Optimization (2010) and Real Options Analysis, Second Edition (2005), both published by John Wiley & Sons, be used as references for some of the models in this book. Those modeling issues that are, in the author’s opinion, critical, whether they are basic issues or more advanced analytical ones, are presented in detail. As software applications change continually, it is recommended that you check the author’s website (www.realoptionsvaluation.com) frequently for any analytical updates, software upgrades, and revised or new models.
Advanced Analytical Models contain many powerful and useful applications ranging from R&D strategy valuation and Six Sigma models to risk simulation and strategic options. A must-have book for those starting out in Excel modeling to advanced modelers. An excellent resource for those applying stochastic models for portfolio project prioritization and valuation.”
-Dr. Robert Finocchiaro, Technical Director, Corporate R&D Services, The 3M Company
Dr. Johnathan Mun is one of the most gifted teachers of quantitative risk analysis in the history of global finance and business. All of his books combine science, art, intuition, creativity, and above all, they are acutely perceptive, always practical, and provide startling clarity, on the methods and pathways of proper business decision making, when faced with uncertainty. Advanced Analytical Models contains a vast treasure trove of over 800 models, unlike anything ever published in the field. Absolutely groundbreaking…The practical application of the risk models in this book, will keep the rest of us busy, for years to come.
-Brian Watt, CRM, Chief Risk Officer and Chief Financial Officer, GECC
Dr. Mun’s expertise in real options and practical modeling methodologies in real world cases is superb, and was used to value technologies in the U.S. military’s Improved Engineering Design Process. His approach quantified real net benefits when considering the knowledge reuse on an enterprise scale and his approach is the most powerful when business value is most difficult to quantify.
-Dr. Ali Farsaie, President & CEO, Spatial Integrated Systems, Inc.
“Dr. Mun’s latest book is scholarly strong and practically meaningful, by successfully synthesizing all aspects of risk and analytical models and presents them in a well-integrated manner. It is a must-read for both practitioners and students in the field of risk management. The Basel II risk analysis is covered extensively through real examples. With in-depth coverage of the most important and practical models, Dr. Mun’s book has set a high standard of publishing in the area of analytical models, risk and decision analysis. The book has significant practical contributions at all levels of risk management. I strongly recommend this book to all readers who want to gain a clear and applied understanding of risk and analytical models.
-Dr. Ehsan Nikbakht, CFA, FRM, PRM, Professor of Finance, Zarb School of Business, Hofstra University, New York
An outstanding collection of important analytic models that span numerous disciplines and can be used in a wide range of industries. The models and their underlying discussion are sound and can be applied as is or modified by the reader for their own applications. The well-written book together with the trial software and models are a powerful combination and provide an exceptional learning opportunity for the reader. This material should be valuable to both analysts and managers who need a sound analytical framework to help them develop and support their decisions.
-Dr. Edmund H. Conrow, CRM, PMP, Risk Management Consultant/Author
Dr. Mun has created -The Encyclopedia of Models’, which addresses a wide-range of cross-industry and cross-enterprise analytical challenges. The models span the spectrum – from simple techniques that one can perform in a few minutes to advanced problems that are tackled in a robust manner. Dr Mun’s new book will show you how to combine analytical methods to point at the right answers. Three words to sum it up: Comprehensive, Lucid, and, Elegant. Every aspiring and accomplished analyst needs to have this book in their library.
-Mark A. Benyovszky, Managing Director, -Zero Delta Center for Enterprise Alignment and Zero Delta University
Risk simulation, binomial lattices, and other computational models have not been within effective reach for many in-the-trenches professionals who did not get this training years ago. Through this book, on top his other books before it, and through his software, Dr. Mun has explained the mysteries, made available the tools, and continues to publish example upon example of how these models can be applied to improve the professional work we’ve been doing. Once in a while, a new thought leader emerges with a train long enough for the rest of us to ride to attain a new level of professionalism – Dr. Mun is one of these.
-James F. Joyner III, CPA/ABV, CVA, CPC, AIFA, Managing Member, Integra Benefits Consulting LLC
The mechanics of risk and options analyses are simple, but successful real-life application is all about the art of framing which requires constant practice. This book is a framing-fitness work-out through an extraordinary variety of recipes. Framing is not just for modeling, without it, decision making under uncertainties is much harder than it already is. If the answer is not explicit in an example, it is likely to exist as a variant in another- reading them triggered solutions to two commodity related problems that have plagued me for some time.
-Fanton Chuck, Chief Executive Officer, Renova Energy plc
Over the years Johnathan Mun’s books have become our corporate bibles with multiple copies in our library. We have recently made the big switch over to Dr. Mun’s Modeling Toolkit, Risk Simulator, and Real Options SLS because we found it easier to use while still being more sophisticated and flexible for our needs. “Advanced Analytical Models” is designed to complement the software and is just packed with useful real-life models that are directly applicable to our consulting work. The small refinements such as being able to specify the random number sequence so that you actually can get the same results in a live presentation reflect his sensitivity and understanding of the consulting environment. We have found his Real Options SLS invaluable in helping hospitals understand the different phasing options available to them when contemplating seemingly unreachable $500M capital projects. Dr. Mun’s genius lies in his ability to take extremely complex theory and bring it down to the level that the rest of us can understand and easily apply to our respective fields. Entertaining as always, who ever thought we would get a book on advance analytics that was actually funny! For an industry (healthcare) that increasingly has to forecast 10 and 15 years into the future while still relying on “budget period” analytics and single point estimates, Dr. Mun’s book is a “light in the storm.” Numerous healthcare examples from queuing theory to methods for analyzing surgical outcomes bring serious analytics into the realm of the practical.
-Lawrence D. Pixley, FACMPE, Founding Partner, Stroudwater Associates