In this chapter, we use a simple example model to show the basic elements required to create and run simulation models using Excel and VBA. We assume that the reader has no prior experience with VBA, and intend to provide a step-by-step description in sufficient detail for the beginner to be able to replicate.
Most of the chapter focuses on the mechanical aspects necessary to automate the process of repeatedly calculating a model and storing the results. The aim is to focus on such issues in a simple context, separate to the detailed discussions concerning the design of risk models, distribution selection and sampling, dependency relationships and other issues discussed earlier in the text. Indeed, this chapter aims to be accessible as an introduction to the pure simulation aspects if it were to be read on a stand-alone basis, i.e. without reference to the rest of the text.
In the latter part of the chapter, we describe how the specific techniques of risk modelling may be integrated with the simulation approach (especially the inclusion of the richer set of distributions discussed in Chapter 9 and Chapter 10, and the use of correlated sampling techniques, as covered in Chapter 11). We also mention some areas of further possible generalisation and sophistication that may be considered.
The file Ch12.CostEstimation.Basic.Core.xlsx contains the simple model that we use ...