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DPL STANDARD |
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DPL 7 Standard provides the essential tools for decision and risk analysis
in a simple, intuitive environment. This page summarizes the key
features of the Standard version of DPL 7.
Click on any of the images below to see a full-size screen shot.
Influence diagrams
Influence diagrams set out the main factors in the model and their relationships. An arc (arrow)
in an influence diagram indicates that the predecessor influences the successor (the node pointed
to by the arrow) -- either its probabilities or its values change when the predecessor changes.
Such relationships are common in business problems. The price of electricity depends
on the price of natural gas, sales volumes depend on price, and regulatory
approval depends on safety study results. Ignoring these relationships, and presuming all risk
factors are independent, can lead to an unrealistically low estimate of risk -- a naively
designed model may be more "diversified" than the problem it is supposed to represent.
Relationships in an influence diagram can also represent the learning present in real option
problems, e.g., the price of oil next year depends on price of oil this year or expected sales
after launch depend on the outcome of the market test.
Decision trees
Decision trees are most useful for their ability to portray the timing and structure of a
problem. They easily answer the "what happens next?" questions, even when the answers are
conditional ("if we paid for the market test, then ..."). Decision trees are intuitive and
accessible, which makes them especially useful for communication. Like other graphics, DPL
decision trees can be easily pasted into PowerPoint.
Decision trees are often used in the evaluation of real options
valuation problems.
Monte Carlo simulation
Develop continuously sampled probabilistic models for risk analysis combining using DPL's
powerful analytical
engine to analyse business problems using Monte Carlo simulation.
Excel spreadsheets links
Spreadsheets are the natural environment for financial calculations -- from simplistic paypack
period to the most complete shareholder value analysis. Most DPL analyses combine a
value model, written in Excel, with a scenario model, made up of a
DPL influence diagram and/or decision tree. DPL acts as the "driver", taking the spreadsheet
through all the possible scenarios and accumulating the results.
DPL has extensive support for Excel, with an easy "point and
click" interface for setting up linked DPL-Excel models.
For the ultimate in analytical power, use DPL's unique conversion utility to translate your
cash flow spreadsheet into DPL's internal language. Working in this mode, DPL "compiles"
your spreadsheet -- taking it apart cell by cell, formula by formula -- and builds a
representation of its calculations. With the spreadsheet in converted form, DPL is able to
recalculate the spreadsheet far faster than Excel, leading to dramatic reductions in runtime.
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Tornado diagrams
Often the first step in an analysis is to produce a tornado diagram -- a graphical
sensitivity analysis which shows the relative importance of the uncertain value
drivers. A tornado diagram can provide direction for the rest of the analysis, allowing
you to focus on the factors which influence decisions and have the greatest effect on value.
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Risk profiles
A risk profile shows you the range of uncertainty in your overall objective measure (e.g.,
NPV). The expected value of the risk profile (the weighted average over all scenarios)
typically tells you what the project is worth. The graph can answer key questions about the
character of the uncertainty: is this a safe business with a narrow band of operational
risk; is this a big bet which has only a 10% chance of paying off; what is the chance we will
lose money?
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Policy Trees™
A DPL Policy Tree™ gives you a complete picture of all the possible scenarios,
and the value maximizing decision policy in each one. A complex policy with thousands or
millions of scenarios can be intimidating, but DPL gives you control over what you want to
see. The Policy Tree™ can be expanded, collapsed or filtered at each node. It
can be made to show only a fixed number of levels from the root of the tree. You also have
control over which information is displayed in the Policy Tree™.
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Policy Summaries™
Do you need to know how often you exercise a downstream option? Or which uncertainty drivers
lead to downstream decision alternatives being selected? Use DPL's unique Policy Summary™
compare capabilities to filter scenarios on which decision alternative is chosen or which
outcome an uncertainty. Uncover decision heuristics for option exercise.
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