worst and best possible scenarios

This forum supports discussion on topics of specific interest to the Model Analysis Special Interest Group of the System Dynamics Society (SIG-MA). It is currently unmoderated, and anybody who is signed in may post to the forum.

Moderator: Jim Duggan

Post Reply
Jean-Jacques Lauble

worst and best possible scenarios

Post by Jean-Jacques Lauble » Sun Jan 20, 2013 2:46 pm

Hi everybody

I am looking for papers, articles about worst and best possible scenarios relating to possible futures.

To illustrate my question, suppose that I want to buy a business and that the minimum profitability (profit per capital invested) I want is say 10%. To determine my decision I want to know the worst possible scenario of the future. If the worst possible scenario is equal or above 10%, I will buy because the probability of reaching my objective is about 100% if I do not want to take any risk.
Now suppose that the best possible scenario is less than 10%. In this case, I will certainly not even start any study about modeling this problem even if I accept a high level of risk.

The interest of studying the worst and the best possible scenarios is that it is sometimes possible to determine these scenarios without any modeling, and if it needs modeling, using extreme conditions, simplifies the model and increases its robustness. It permits too to use the model in extreme conditions and to test it. If it is possible to build the scenarios without any SD modeling, it permits to view things in a more classic and easiest fashion. Logically trying to build worst and best possible scenarios should be systematically made to justify the modeling effort or continuing the building effort or working with the model if already built.

Does anybody have any idea or references about the subject?

Thanks in advance.
Jean-Jacques Laublé.

Zahir Balaporia
Posts: 6
Joined: Wed Mar 24, 2010 5:15 pm

Re: worst and best possible scenarios

Post by Zahir Balaporia » Tue Jan 22, 2013 12:07 am

I would build a spreadsheet model to calculate the ROI and then use MonteCarlo simulation to estimate the probability distribution of the ROI. I use @Risk for Excel, but there are other options too.

Hope that helps.

Jean-Jacques Lauble

Re: worst and best possible scenarios

Post by Jean-Jacques Lauble » Tue Jan 22, 2013 8:55 am

Hi Zahir

Thank's for the reply.

Jean-Jacques Laublé

Post Reply

Who is online

Users browsing this forum: No registered users and 1 guest