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Sensitivity Analysis Is

Sensitivity analysis is a technique used to assess how changes in model inputs affect outputs, helping to identify critical variables and quantify risks. It is commonly applied in finance, engineering, and project management to inform decision-making and scenario exploration. Key methods include One-at-a-Time (OAT), Monte Carlo simulations, and scenario analysis.

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11 views1 page

Sensitivity Analysis Is

Sensitivity analysis is a technique used to assess how changes in model inputs affect outputs, helping to identify critical variables and quantify risks. It is commonly applied in finance, engineering, and project management to inform decision-making and scenario exploration. Key methods include One-at-a-Time (OAT), Monte Carlo simulations, and scenario analysis.

Uploaded by

dorjeenamgyaltamang
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Sensitivity analysis is a technique to study how uncertainty in a model's

inputs affects its outputs, essentially answering "what-if" questions by


changing variables (like costs, rates, or demand) to see the impact on
results (like profit or project completion). It helps identify critical variables,
quantify risks, explore scenarios, and make better decisions, commonly
used in finance, engineering, and project management to understand key
drivers and build robust plans.
Key Aspects
 Purpose: To understand which inputs have the most significant
effect on outcomes, assess model reliability, and identify
risks/opportunities.

 How it Works: Systematically changes one or more input variables


(independent) within a plausible range to observe the resulting changes in
the output (dependent variable).

 Methods: Includes One-at-a-Time (OAT), Monte Carlo simulations,


scenario analysis, and visualization tools like tornado diagrams.

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