Question

Summarize in one paragraph what sensitivity Analysis is ?

Answer 1

ANS: Sensitivity analysis is the study of how the uncertainity in the output of a mathematical model can to allocated to the different sources of Input. Sensitivity Analysis is a tool used in the financial modeling to analyse how the different values of set of independent variable affect a specific independent variable under the certain specific condition.This Model is also referred to as What-if or simulation analysis. It is a way to predict the outcome of a decision given a certain range of variables. Sensitivity analysis helps in assessing the riskiness of a strategy & helps in determining how much an ouput is dependent on an input. Further more, Sensitivity Analysis helps in identifying the key variables that have major influenece on cost of project & also heps the entities to assess whether these changes will affect the project decision made.