## Quants

jravi044
Posts: 2
Joined: Fri Jan 27, 2017 8:05 am

### Quants

Question : Suppose that the 95% confidence interval for the output of ending capital is evaluated as (\$85.50, \$ 92.40) for a simulation run with 50 scenarios. In addition, the simulation resulted in a mean ending capital amount of \$88.95 with a standard deviation of \$9.5. Now you want to improve the accuracy of this confidence interval by running a simulation of 200 scenarios. What is the new 95% confidence interval with a simulation of 200 scenarios using the same mean and SD from the model with 50 scenarios?

Answer: When four times the number of scenarios is generated, the range of the 95% CI will be cut in half. Thus a quick calculation is to just divide the \$3.45 distance from the mean from the 50 scenarios run by two. And add and subtract this distant from the mean of \$88.95. Therefore, 3.45/2 = 1.725
New CI = (88.95 – 1.725, 88.95 + 1.725) = (87.225, 90.675)

Doubt: in the above answer from where \$3.45 has came?

Tags:

sunilshetty12345
Posts: 5
Joined: Thu Apr 06, 2017 7:27 am

### Re: Quants

\$ 85.50 - (\$ 88.95) Mean = 3.45
\$ 92.40 - (\$ 88.95) Mean = 3.45

3.45 is the distance from the mean