Why I Use RiskAmp

Posted on Sa 19 Januar 2008 in misc • 3 min read

A few years ago I got fascinated with [Monte Carlo simulations]{#lw_1200770370_0 .yshortcuts} after this application appeared in my 401k plan. At the time they had this[]{.push-double} [“]{.pull-double}what if” calculator where you enter your age and then the amount you plan to save yearly in the 401k. You’d have to select how you wanted to invest your money, aggressively, middle of the road, or conservatively. After a few seconds of the application running in the background, a mini report would pop up and say:

Mr. Ott, if you invested \$10,000 a year in an aggressive 401k portfolio you could end up with an account balance of either \$500,000 or \$2,300,000 by age 65.

I was intrigued, how did this 401k website know this? A short while later I realized it was a [Monte Carlo simulation]{#lw_1200770370_1 .yshortcuts} that was behind it all.

Since that time I started looking around for a good Monte Carlo simulation but come to find that they cost several hundreds to thousands of dollars. Since I’m frugal (cheap), I decided to see if there were any Excel Addin’s out there for free. I did find a few really feature lacking [free Excel Addin]{#lw_1200770370_2 .yshortcuts} Monte Carlo Simulations that didn’t impress me too much.

Then I stumbled across RiskAMP and was surprised by the power of this little Addin.

RiskAMP is a feature rich and tightly intergraded Excel Addin that lets you run all kinds of Monte Carlo simulations. It comes with a chart wizard, over 20 simulation functions, and over 35 random distribution functions. You can model simulations to your hearts content, all in the comfort of Excel. Once you run the simulations you can create a simulation results sheet complete with charts, all with a few clicks in the menu system.

Do you want to model at standard Gaussian distribution? RiskAMP does it.

Do you want to model a Pareto distribution? RiskAMP does it!

What about Binomial distributions? Geometric distributions? Multivariate distributions? Power distributions? Yes, yes, yes, and [YES]{.small-caps}! [RiskAMP]{style="text-decoration: underline;"} can do it all!

RiskAMP is the primary simulation system I use to model my stop placement in the Forex Market. I won’t tell you how I do it (trade secret) but since I started modeling possible currency volatility outcomes, I’ve been able to place my stops just outside of the volatile price swings and stay in the game. This lead to swinging the probability in my favor and to the much enjoyed success of my \$100 Forex Experiment last year.

I’ve also used RiskAMP to model the outcomes in my controversial[]{.push-double} [“]{.pull-double}When Traders Blow Up[]{.push-double}[”]{.pull-double} post and I continuously use it to model volatility outcomes for various stocks. Combined with RapidMiner and TraderXL Pro, RiskAMP has contributed greatly to my bottom line over the last year and I look forward to building more[]{.push-double} [“]{.pull-double}what if” scenarios with it.

Just for fun, I’m attaching a few of the sample spreadsheets that come with the RiskAMP trial. You’ll need the Addin to make it work but you can test out some of the powerful things you can do with it (all Excel spreadsheets).

- RiskAMP Sample Returns - Correlated Asset Portfolio - Retirement Portfolio

I suggest my readers take advantage of the RiskAMP free trial to try out the software. I opted to buy the Personal Edition and quickly realized what a steal that was. As always, if you have a question, please leave me a comment. Please subscribe to my feed on the way out.