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Appendix B: Using Palisade’s Decision Tools Suite

FIGURE B.17  Sample model output distribution in @RISK.

B.3.4  Modifying a Graph

Display your output graph. If it has closed, place your cursor in an output cell and
select “Browse Results” from the results group. Right mouse click inside the graph
frame and select “Graph Options.” You will see the window shown in Figure B.18.
The distributions tab enables you to alter the graph format. Choose a cumulative
ascending distribution. Note that when you use the automatic, probability density, or
relative frequency options, you can vary the number of bins used to define your graph.
As noted in the text, this can have a strong influence on the appearance of your data
at times.
The title tab enables you to enter a title and control the font style and color. The
x- and y-axis tabs enable you to enter labels on the axes and to control their range as
well. You have the option of eliminating grid lines, scale factors, and tick labels if you
desire. With the curves tab, you can alter the style, fill, and color of each distribution
in your graphic. You can eliminate the legend or modify what appears in it with the
legend tab. Delimiters can be removed by the delimiters tab and new markers can be
added with the markers tab. Figure B.19 shows a transformation of the information
shown in Figure B.17 using the graph options tabs with markers added.

B.3.5  More Results

The small icons on the right side of the results group will make the results of the
simulations available to you. The first one, “Simulation Detailed Statistics,” pro-
vides descriptive statistics and percentiles in 5% increments for every output and
input in your model. You may also query your simulation data to learn specific per-
centile values (e.g., the 99.5 percentile) or to learn the percentile of any given value
Appendix B: Using Palisade’s Decision Tools Suite 543

FIGURE B.18  Graph options in @RISK.

FIGURE B.19  Transformation of the data in Figure B.17.

544 Appendix B: Using Palisade’s Decision Tools Suite

FIGURE B.20  Four of the simulation setting icon tabs in @RISK.

($19,000,000). This feature enables you to describe the CDF for any variable in your
simulation. The “Simulation Data” icon makes every iteration value for every input
and output available.

B.3.6  Simulation Settings

Now let’s look back in the simulations group at the small icons there. The first one,
“Simulation Settings,” is important to understand. Four of its tabs are illustrated in
Figure B.20. The first of these allows you to set the number of iterations and simula-
tions you will run and to turn the Monte Carlo process on or off. These features are
also directly available in the simulation group.
The view tab lets you control what you see during a simulation. The “Pause on
Output Errors” option can be especially helpful when you are verifying your model.
The random numbers options on the sampling tab are useful to know. Generally, you
will leave the sampling type on Latin Hypercube; the alternative is Monte Carlo, and
these two sampling techniques are discussed in Chapter 14.
You have a choice of many different random number generators. Most users rely on
the default generator shown in the figure. Of special interest is the initial seed option.
You can choose this seed randomly or use a fixed seed. There may be times when you
are running the exact same model with relatively subtle changes in selected inputs
that reflect the effect of a risk management option on your issue. In these instances it
Appendix B: Using Palisade’s Decision Tools Suite 545

FIGURE B.21  Custom convergence settings for model outputs.

would be useful to compare without and with RMO (risk management option) condi-
tions, all other things being equal. Choosing a fixed seed ensures that your model gen-
erates the same random values for unchanged input distributions. Thus, any changes
in outputs are attributable to the RMO.
If you use a fixed seed, you have the option of entering the seed. A “1” is shown in
Figure B.20. Choose something simple and easy to remember.
Collecting data from your input distributions can slow your simulation down when
you have a lot of inputs and a large number of iterations. You have the option (Monitor)
of collecting all, some, or none of your input distributions.
The convergence tab gives you an alternative to running your model for a fixed
number of iterations. With large and slow models, it may be helpful to just run your
model until a few parameters of special interest, i.e., outputs you have identified as
RiskConvergence outputs, have stabilized. Figure B.21 shows how to identify these
outputs. Simply select the “Add Output” icon when your cursor is in the cell with the
output you want to identify. When the familiar window opens with the output name,
click on the small function icon (fx) and the output properties box opens. Choose the
convergence tab and check the box to define custom convergence settings. Here you
can identify convergence as an absolute amount or a percentage. You can also identify
the parameters from the output distribution to use in your convergence monitoring.
Look back at Figure B.20 again. Once the identified statistics stop changing by
more than 3% (with a 95% confidence interval) every 100 iterations (you can change
this option as well), the simulation will stop. This can save time with some models
while providing you with the level of precision you desire. Less commonly, you may
be working with a model where you cannot be sure that convergence is reached with,
say, 10,000 iterations. In such a case you may want to use convergence rather than a
fixed number of iterations.
There are many more useful features of @RISK. Correlations, distribution fit-
ting, and other sensitivity analysis are features you can grow into once you begin
to use the software. Exercises explaining these more advanced features are found
546 Appendix B: Using Palisade’s Decision Tools Suite

at the Palisade Web site, http://www.palisade.com/bookdownloads/yoe/principles/, to

accompany this text. Before moving on to consider PrecisionTree, note that the “Excel
Reports” icon enables you to export results from and descriptions of your model to a
Microsoft® Excel spreadsheet.

B.4  PrecisionTree
PrecisionTree supports risk assessment in Microsoft Excel using decision trees and
influence diagrams. Decision trees enable you to visually map complex decision prob-
lems in an organized and sequential manner. The decision tree software can also be
used, along with @RISK, to build powerful event-tree models commonly used in risk
assessment as described in Chapter 15.
The description of PrecisionTree, which follows, will introduce you to the use
of the software for event-tree models. Overlooking the decision tree capability of
this software does not do justice to the full range of features available to you with
PrecisionTree. The simple event-tree example that follows does, however, expand the
range of applications for this tool.
A new example is used for this discussion. Consider a risk management activity
that is concerned about the likelihood of aquatic nuisance species (ANS) reaching
and spreading throughout a lake. The necessary sequence of events is that the ANS
reach the lake from its originating waterway, that it survive in the lake, and that it
find enough life requisites to establish a breeding colony. It would then have to spread
from that breeding colony throughout the lake.
In this section you will learn how to:

1. Build a tree model

2. Use @RISK to change the probability inputs in the model
3. Modify the model to use as an event tree
4. Recognize other features of PrecisionTree

B.4.1  Building a Simple Tree Model

Figure B.22 shows the icon set used by PrecisionTree. Notice that PrecisionTree
enables you to build and use influence diagrams. This capability is not explored in
this discussion, but a discussion of influence diagrams can be found in Chapter 15.
The analysis group is likewise not explored. These features are used primarily with
PrecisionTree’s decision tree applications, which we ignore in order to focus on how
one would use the software to build an event tree.

FIGURE B.22  PrecisionTree icon set.

Appendix B: Using Palisade’s Decision Tools Suite 547

FIGURE B.23  Starting a PrecisionTree model.

To begin a new tree model, place your cursor in a cell and select the “Decision
Tree” icon. This will open a box that asks you to identify the cell in which you’d like
to begin your model. See Figure B.23. You can use any cell in your spreadsheet. If you
have no clear need for another starting point, cell A1 works fine.
After you identify the starting point for your model, a new tree will appear, as seen
in Figure B.24. The first thing you will have to do is name your model. Simply click
on the box that says “New tree” and the window shown in Figure B.24 will open. Type
the name as shown and click “Okay.”
Note that there are five tabs in this window. You will want to explore these tabs
when you are ready to build and use decision trees. With your model named, you are
ready to build your model.
Click on the triangle endpoint to begin to build your model. This is how you expand
your model, by clicking on endpoints along the pathways you wish to expand. When you
click on an endpoint, the node settings window of Figure B.25 will appear. Notice there
are five different kinds of nodes you can add to your model at this point. For an event
tree, all nodes will be chance nodes. When the chance node is selected, the default num-
ber of branches from the node is two. To add additional branches select the “Branches”
tab. Two nodes will be fine for this example. Enter the name for your node. When you
click on “okay,” you will see the tree expanded as shown at the top of the figure.
There are a few things to notice. First, notice that the boxes on the branches have
default names. To change them, click on the box and type in your desired branch
names. Note that each branch has 50% on the top of it to designate the probability
of following that branch’s path. These are default values. Leave them for now; they
can be changed later once the structure of your model is determined. Beneath the
branch you see a 0; this is another default value. The #VALUE you see to the right
of the node is part of the back-solving calculation used by PrecisionTree when solv-
ing decision trees. Note that the formula box for Microsoft® Excel that indicates the