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470 Corporate Finance BRILLIANT’S

OR
What are the statistical techniques of Risk Analysis? Explain them in brief.
[añH$ EZm{b{gg H$s ñQ>o{Q>pñQ>H$b Q>op³Z³g ³¶m h¢? CÝh| g§{jßV ‘| g‘PmB¶o&
OR
Enumerate the limitations faced in practical use of simulation analysis.
{g‘wboeZ EZm{b{gg Ho$ ì¶dhm[aH$ Cn¶moJ ‘| AmZo dmbr gr‘mAm| H$m dU©Z H$s{OE&
Statistical Techniques of Risk Analy- [añH$ EZm{b{gg H$s gm§p»`H$s` {d{Y`m±
sis
The different techniques of risk analysis [añH$ EZm{b{gg Ho$ {bE {OZ {d{^ÝZ Q>opŠZŠg H$s
discussed above are conventional techniques. MMm© nyd© _| H$s JB© h¢ do g^r naånamJV Q>opŠZŠg h¢Ÿ& do
They do not measure and quantify the risk in [añH$ H$s _mÌm H$m R>rH$-R>rH$ AZw_mZ bJmZo _| ghm`Vm Zht
precise term. However, there are certain H$aVo h¢Ÿ& hmbm§{H$ Hw$N> gm§p»`H$s` {d{Y`m± CnbãY h¢ Omo
statistical techniques available to measure and H¡${nQ>b ~OqQ>J {S>grOZ àmogog go Ow‹S>r hþB© [añH$ H$mo _mnVr
incorporate risk in a capital budgeting decision
process. The important concept used in these h¡Ÿ& BZ gm§p»`H$s` VH$ZrH$m| Ho$ A§VJ©V EH$ _hËdnyU© H$m°ÝgoßQ>
statistical techniques is that of probability. H$m Cn`moJ {H$`m OmVm h¡ Omo àmo~o{~{bQ>r H$hbmVm h¡Ÿ&
Meaning of Probability àmo~o{~{bQ>r H$m AW©
Probability may be described as a mea- àmo~o{~{bQ>r go A{^àm` {H$gr KQ>Zm Ho$ hmoZo H$s g§^mdZm
sure of the likelihood that an event will occur. H$mo _mnZm h¡Ÿ& `{X {H$gr KQ>Zm H$m hmoZm gw{ZpíMV h¡ Vmo
If an event is certain to occur, we say that its H$hm Om gH$Vm h¡ {H$ CgH$s àmo~o{~{bQ>r 1 h¡Ÿ& Cgr
probability of occurrence is one. If it is certain àH$ma, `{X `h {ZpíMV h¡ {H$ H$moB© KQ>Zm Zht hmoJr Vmo
that an event will not occur, we say that its
H$hm Om gH$Vm h¡ {H$ CgH$s àmo~o{~{bQ>r 0 (eyÝ`) h¡Ÿ&
probability of occurrence is zero. Thus, prob-
ability of all events to occur lies between zero Bg àH$ma, g^r KQ>ZmAm| H$s àmo~o{~{bQ>r 0 go 1 Ho$ ~rM _|
and one. hmoVr h¡Ÿ&
Utility of Probability in Risk Analysis [añH$ EZm{b{gg _| àmo~o{~{bQ>r H$m Cn`moJ

The concept of probability is fundamental [añH$ EZm{b{gg Q>opŠZH$ _| àmo~o{~{bQ>r Ho$ H$ÝgoßQ>
to the use of the risk analysis techniques. The H$m Cn`moJ _hËdnyU© h¡Ÿ& H¡${nQ>b ~OqQ>J {S>grOZ _|
most crucial information for the capital bud- â`yMa go g§~§{YV H¡$e-âbmoO H$s gyMZm H$m _hËd ~hþV
geting decision is forecasting of future cashflows. A{YH$ h¡Ÿ& nydm©Zw_mZ bJmZo H$m EH$ VarH$m `h h¡ {H$ nyar
One way is to forecast a single figure for a pe-
Ad{Y Ho$ {bE EH$ {\$Ja {ZYm©[aV H$a {b`m OmE {Ogo
riod. It is referred as the ‘best estimate’. But a "~oñQ> EpñQ>_oQ>' H$hVo h¢Ÿ& {H$ÝVw qgJb {\$Ja H$_ {dídgZr`
single figure is less reliable because we do not
know the chances of this figure actually occur- hmoVm h¡ Š`m|{H$ ^{dî` _| CgHo$ hmoZo H$s gå^mdZm Ho$ ~mao _|
ring. For this reason, the forecasting should not h_| OmZH$mar Zht hmoVr h¡Ÿ& Bg H$maU ^{dî` g§~§Yr nydm©Zw_mZ
be based on a single estimate but there should {H$gr EH$ EpñQ>_oQ> Ho$ AmYma na Zht bJmE OmZo Mm{hE
be a range of associated probability i.e. ‘a prob- ~pëH$ àmo~o{~{bQ>r H$s EH$ nyar aoÝO hmoZr Mm{hE {Ogo
ability distribution’. "àmo~o{~{bQ>r {S>ñQ´>rã`yeZ' H$hVo h¢Ÿ&