Uncertainty & Sensitivity
valuation_simulationQuantify uncertainty in intangible asset valuations using Monte Carlo simulations, sensitivity ranking, and decision-tree expected values.
Instructions
Uncertainty analysis: Monte Carlo valuation, Monte Carlo sensitivity ranking, decision-tree expected values, and one-at-a-time sensitivity analysis. Method selects the formula. Use to quantify and stress the uncertainty around a point valuation; monte_carlo simulates all listed inputs, monte_carlo_sensitivity ranks the drivers. For a single deterministic point value use the relevant valuation tool; sensitivity_analysis varies one parameter of a core function only. Per method: monte_carlo needs input_distributions (optional: iterations, seed); monte_carlo_sensitivity needs base_params + distributions (optional: iterations, seed); decision_tree needs tree; sensitivity_analysis needs function_name + parameter_name + parameter_range + fixed_parameters. monte_carlo_sensitivity requires iterations between 1000 and 100000. Only method is required; all other parameters are method-dependent — supply those the selected method names and omit the rest (defaults apply where defined). Rates and premiums are decimals (0.10 = 10%). Pure arithmetic: no I/O and no external calls, rounded to 2 decimals; parameters belonging to other methods are accepted and ignored. An unknown method, or a missing method-required parameter, returns an error instead of a value.
Input Schema
| Name | Required | Description | Default |
|---|---|---|---|
| seed | No | Random seed (integer ≥ 0) for reproducible simulations. | |
| tree | No | Decision tree {"nodes": [...], "edges": [...]}; node types decision, chance, terminal. | |
| method | Yes | Formula to apply. Options: monte_carlo = Simulate all listed inputs, sum-based valuation.; monte_carlo_sensitivity = Rank parameters by their impact on the valuation.; decision_tree = Backward induction over a decision tree.; sensitivity_analysis = One-at-a-time sensitivity of a core function. | |
| iterations | No | Simulation iterations; monte_carlo_sensitivity requires 1000-100000. | |
| base_params | No | Base values for all parameters, including those held fixed. | |
| distributions | No | Map of parameter name to {distribution, params} for the simulated inputs. | |
| function_name | No | Core function to vary, e.g. "present_value", "capm_discount_rate", "wacc". | |
| parameter_name | No | Name of the parameter to vary. | |
| parameter_range | No | Values to test for the varied parameter. | |
| fixed_parameters | No | Values for all other parameters, held constant. | |
| input_distributions | No | Inputs to simulate, each {name, distribution, params}; distribution is normal (mean, std), uniform (low, high) or triangular (low, high, mode). |
Output Schema
| Name | Required | Description | Default |
|---|---|---|---|
| error | No | Error message when the call fails. | |
| steps | No | Intermediate calculation steps for traceability (one string per step). | |
| value | Yes | Computed valuation, rate, or metric. | |
| method | No | Formula / method name that produced the result. | |
| assumptions | No | Modelling assumptions applied (list of strings or key/value object). | |
| defaults_applied | No | Optional parameters that were not supplied, so their documented defaults were used. | |
| formula_reference | No | Mathematical formula or reference applied. |