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Joined: Fri Jan 27, 2017 8:05 am


Postby jravi044 » Thu May 04, 2017 11:11 am

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?
please explain the logic?


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

Re: Quants

Postby sunilshetty12345 » Wed Jun 07, 2017 7:53 pm

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

3.45 is the distance from the mean

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