Knowledge Base

How can I find the probability of some event occuring?

You have some trigger event in your model that is either true or false. How can you find the probability that this event happens (or doesn’t happen)?

The trick is to use this event to set some other cell to zero or one, using an IF function. Here, I am checking whether the market return is greater than zero (in cell C6). I turn that into a 1 or 0 in cell C7:

After running a simulation, the average value will equal the probability of that event happening during the simulation. You can use the SimulationMean function to get the average value (in cell C9).

Why does that work? It’s the same as counting up all the times during the simulation that the event was true, and then dividing it by the total number of trials – this is the probability.

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