Understanding Monte Carlo : NPV Cases

Recently, i work on Monte Carlo Simulation to predict possible outcome given certain amount of NPV, and specified amount of standard deviation. Monte Carlo simulation basically is a tool to predict specified amount of number in series of simulations given the deviation attached. This analysis is helpful to give us information the minimum and maximum outcome to our results.

In case of Net Present Value, this tool of analysis help us to estimate the possible outcome of NPV given swings in revenue. Thus, we may know the minimum and maximum NPV we may obtain given deviation that we set.

Here is tutorial video to help you learn about Monte Carlo Simulation :

http://www.youtube.com/watch?v=Q3rv3yF0bPA&feature=related

Stock Market Return Amidst Drastic Change

Economist recently posted an interesting, empirical based facts about stock market return amidst great events in human history during 20th century. The result is fascinating, probing an important fact about how stock market react to positive to negative events. It shown that, stock market return during positive events exceed loss in negative events. The differential is also quite substantial, giving insight for economist, and investor in particular to take a seat, and set a cautious concern amidst crisis. Stock losses does not really hurt, if then positive events come later to off set the loss.

Here is the link :
http://www.economist.com/blogs/dailychart/2011/10/stockmarket-returns-20th-century

Why Regulation won't Work on American's Financial Institutions

There are reasons, argued by Nouriel Roubini, Professor of Economics at the Stern School of Business, NYU, Chairman of Roubini Global Economics :
1. Smart and greedy bankers and traders will always find ways to circumvent new rules
2. CEOs and boards are themselves subject to major conflicts of interest, because they don’t represent the true interest of their firms’ ultimate shareholders
3. CEOs and boards of directors of financial firms – let alone regulators and supervisors – cannot effectively monitor the risks and behaviors of thousands of separate profit and loss centers in a firm, as each trader and banker is a separate P&L with its own capital at risk

As a result, any reform of regulation and supervision will fail to control bubbles and excesses unless several other fundamental aspects of the financial system are changed :
First, compensation schemes must be radically altered through regulation, as banks will not do it themselves for fear of losing talented people to competitors
Second, repeal of the Glass-Steagall Act, which separated commercial and investment banking, was a mistake.
Third, financial markets and financial firms have become a nexus of conflicts of interest that must be unwound.
Fourth, greed cannot be controlled by any appeal to morality and values. Greed has to be controlled by fear of loss, which derives from knowledge that the reckless institutions and agents will not be bailed out.

Source : http://www.project-syndicate.org/commentary/roubini28/English