Risk Analysis Software

Risk analysis software covers a wide spectrum of capabilities and price points, from under-$1,000 general-purpose packages to $100,000 and much higher priced packages tailored for banks, insurance companies and enterprise risk managers in large corporations.  Our focus here is on lower-cost general-purpose packages that offer great flexibility, but require that you "roll your own" risk analysis model.  The most popular packages perform Monte Carlo simulation of models created in Microsoft Excel, with a surprising range of technical capabilities.

Some capabilities to look for in a general-purpose package:

  • High-quality (long-period and well-equidistributed) random number generation
  • Latin Hypercube and/or Quasi Monte Carlo based sampling for variance reduction
  • A wide range of analytic probability distributions -- leading packages have 40 or more
  • Flexible creation of custom distributions, both continuous and discrete
  • Ability to correlate dissimilar distributions, typically via rank order correlation
  • Ability to fit analytic distributions to user-supplied data or to simulation results
  • Statistics to measure central tendency and variation, quantile measures, and confidence intervals
  • Easily created but customizable charts and graphs of PDFs, CDFs, frequencies and cumulative frequencies
  • Sensitivity analysis of outputs against uncertain inputs
  • Ability to run multiple simulations, varying parameters across the simulations

Some advanced capabilities available in the best packages:

  • Shifting and truncation of analytic distributions
  • Independent streams of random numbers for different distributions
  • Ability to run "trace simulations" using pre-generated simulation trials
  • Ability to model conditional distributions in simulation results
  • Ability to find optimal or near-optimal decisions using simulation optimization
  • Ability to create (analytic or custom) distributions and share them among modelers
  • Ability to create custom risk analysis applications, and distribute them to end users
  • And of course, the fastest possible execution of simulation trials

Finally, technical support and upgrades are a very important part of any software product that will be used for high-stakes risk analysis projects.  The leading companies in this area have been selling and supporting software for more than 15 years; all of them offer, and charge for, "annual support" which includes software updates and upgrades, and ongoing hotline access.

It should come as no surprise that Frontline Systems' new Analytic Solver Simulation product has been engineered to include all of the standard and advanced capabilities mentioned here.  But there's no need to "take our word for it" -- you can download and install Analytic Solver Simulation and use it, free of charge, for a 15-day evaluation period.

Conclusion

This concludes our Risk Analysis Tutorial -- we hope you've enjoyed it! You should now have the foundational knowledge needed to continue to our tutorials on Simulation and Monte Carlo Simulation.