User manual PALISADE PRECISIONTREE 5.5

[. . . ] User's Guide PrecisionTree Decision Analysis Add-In For Microsoft Excel ® Version 5. 5 May, 2009 Palisade Corporation 798 Cascadilla St. Ithaca, NY 14850 USA (607) 277-8000 http://www. palisade. com Copyright Notice Copyright © 2009, Palisade Corporation Trademark Acknowledgments PrecisionTree, TopRank, BestFit and Palisade are registered trademarks of Palisade Corporation. RISK is a trademark of Parker Brothers, Division of Tonka Corporation, and is used under license. Microsoft, Excel and Windows are registered trademarks of Microsoft Corporation. Welcome Welcome to PrecisionTree, the decision analysis software that's an add-in to Microsoft Excel. [. . . ] For an influence diagram, only the default Influence Diagram calculation method is available. The Path Payoff Methods for decision trees are: · Cumulative Payoff - The Cumulative method for payoff calculation is the simplest method for calculating the payoff values for each path through a decision tree. With the cumulative method, values for each branch on a path through a tree are simply added up in order to calculate the payoff value shown at the end node for the path. The branch values used can be modified with the cumulative payoff calculation options in the Decision Tree Node Settings dialog box for each node. For more information on these options, see Use of Branch Definition in the Edit menu Decision Tree Node Settings Command in this chapter. Chapter 5: PrecisionTree Command Reference 123 · Payoff Formula - The Payoff Formula method for payoff calculation allows end node payoff values to be calculated using a formula. This formula can reference the values and probabilities for branches on the path whose payoff is being calculated. A typical payoff formula would be: =BranchVal("Price", 0)*BranchVal("Sales Volume", 0)BranchVal("Costs", 0) When a payoff for a path is calculated using this formula, the value for the branch on the path from the node Price is multiplied by the value for the branch on the path from the node Sales Volume. Then, the value for the branch on the path from the node Cost is subtracted from the Price * Sales Volume value to give the payoff for the path. By clicking on an end node, however, the payoff formula for a specific path may be changed as necessary with the option Use Alternate Formula. Two functions may be used in a payoff formula (in addition to any standard Excel function, operator or cell reference): - BranchVal("node name", missing value), which returns the value of the branch of node name which was followed on the path. The missing value is the number that should be used (typically 0) if no node with that name exists on that path. If the payoff formula contains node names that are encountered on every path, the missing value argument is optional. - BranchProb("node name", missing value), which returns the probability of the branch of node name which was followed on the path. The missing value is the number that should be used (typically 0) if no node with that name exists on that path. If the payoff formula contains node names that are encountered on every path, the missing value argument is optional. · Linked Spreadsheet. The Linked Spreadsheet method for payoff calculation allows both branch and payoff values in a decision tree to be linked to cells in an Excel model that is Edit Menu 124 external to the tree. By linking values, end node payoffs can be calculated by a detailed spreadsheet model. In a linked tree, each node can be linked to an Excel cell reference or range name. When a linked tree is recalculated, branch values on each path in the tree are substituted into the designated cells in the Excel model and the payoff is calculated. End node payoffs are then taken from the cell specified as the location of the payoff value. For linked trees, two additional linked model settings are available ­ Link Updating and Default Cell. - Link Updating specifies whether or not PrecisionTree will automatically update end node payoffs in a linked tree each time the tree or linked model is edited. [. . . ] Skewed distributions have more values on one side of a peak or most likely value - one tail is much longer than the other. A skewness of zero indicates a symmetric distribution, negative and positive skewness values indicate distributions that are skewed to the left and right, respectively. A graph showing the reasonable limits of change for each independent variable and the unit impact of these changes on the expected value of a model. Occurs when two profiles on a cumulative risk profile do not cross and there is space between them. [. . . ]