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Sensitivity Analysis


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What Does Sensitivity Analysis Mean?
A technique used to determine how different values of an independent variable will impact a particular dependent variable under a given set of assumptions. This technique is used within specific boundaries that will depend on one or more input variables, such as the effect that changes in interest rates will have on a bond's price.

Sensitivity analysis is a way to predict the outcome of a decision if a situation turns out to be different compared to the key prediction(s).

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Sensitivity Analysis

  1. 1. SENSITIVITY ANALYSIS Presented by :- Mini Suneja
  2. 2. Meaning of sensitivity analysis <ul><li>Sensitivity analysis serves as an integral part of solving linear programming model & is normally carried out after the optimal solution is obtained. It determines how sensitive the optimal solution is to making changes in the original model. </li></ul><ul><li>It is also called POST OPTIMALITY ANALYSIS. </li></ul>
  3. 3. Importance of Sensitivity Analysis <ul><li>The analysis renders the model a dynamic characteristics that allows the analyst to check changes in the optimum solution resulting from future changes in the data of the model. </li></ul><ul><li>It deals with the study of the changes in the optimum solution when the parameters of the problem changed. </li></ul>
  4. 4. Changes in the parameters includes : <ul><li>Changes in the coefficients of the objective function. </li></ul><ul><li>Changes in the right hand side of the constraints. </li></ul><ul><li>Addition of a new variable. </li></ul><ul><li>Deletion of an existing variable </li></ul><ul><li>Changes in the technological coefficients. </li></ul>
  5. 5. Bibliography <ul><li>Quantitative Techniques Vol I </li></ul><ul><li>- By D.C. Jhamb </li></ul>