Question

While conducting Risk Analysis, a firm investigates how changes in the level of one variable will affect the overall value of a project. The firm repeats the process for other variables that they are concerned would affect value. What type of Risk Analysis is the firm doing?

Answer 1

Differential Sensitivity testes are done by changing the level of one variable and and observing the impact on the other class of the variables . When a sensitivity test is being undertaken , the impact of change in one of the variable is studied , while keeping the other variables constant .

The types of variables when conducting the sensitivity tests are :

No	Type	Description
1	Test Variable	The variable on which experimental changes are made
2	Target Variable	The variable on which expected target changes in results are obtained
3	Control Variables	Control variables for moderating the experiment
4	Observational variables	Final list of variables on which the changes are observed

Example – Like impact in changes in sales on the 3 situations Optimistic , As expected and , Pessimistic can be done by sensitivity analysis .

Thanks