Conduct Monte Carlo Simulation Using Historical Data and Resampling Techniques

question 46

Multiple Choice

Conduct Monte Carlo simulation using historical data and resampling techniques. Use the information below to answer the following question(s) .
Below is a spreadsheet for a hotel overbooking model. $\begin{array}{|c|c|c|c|l|l|}\hline & \text { A } & \text { B } & \text { C } &{\text { D }} & \text { E } \\\hline 1 & \text { Hotel Overbooking Model } & & & \text { Demand } & \text { Probability } \\\hline 2 & & & & 290 & 0.03 \\\hline 3 & \text { Data } & & & 295 & 0.05 \\\hline 4 & & && 300 & 0.08 \\\hline 5 & \text { Rooms av ailable } & 350 && 305 & 0.12 \\\hline 6 & \text { Price } & \$ 120 & & 310 & 0.15 \\\hline 7 & \text { Overbooking cost } & \$ 100 && 315 & 0.20 \\\hline 8 && & & 320 & 0.15 \\\hline 9 & \text { Model } & & & 325 & 0.10 \\\hline 10 & & & & 330 & 0.05 \\\hline 11 & \text { Reserv ation limit } & 350 && 335 & 0.04 \\\hline 12 & \text { Customer demand } & 320 && 340 & 0.02 \\\hline 13 & \text { Reservations made } & & &345 & 0.01 \\\hline 14 & \text { Cancellations } & 15 \\\hline 15 & \text { Customer arrivals } & \\\hline 16 & & \\\hline 17 & \text { Overbooked customers } & \\\hline 18 & \text { Net revenue } & \\\hline\end{array}$ Assume that each reservation has a constant probability p = 0.04 of being cancelled. Answer the question(s) using the Risk Solver Platform.
-With respect to B12, what is the range of weights given in the Parameters section in the Discrete dialog?

• A) $E$2:$E$13
• B) $D$2:$D$8
• C) $D$2:$D$13
• D) $E$2:$E$8

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Definitions:

Equity Carve-Outs

A corporate strategy of creating a new, independent company through the sale or distribution of new shares of an existing part of the company to external or existing shareholders.

EMH

Efficient Market Hypothesis, the theory that all known information is reflected in stock prices and that it is impossible to consistently outperform the market through expert stock selection or market timing.

Law Of One Price

The rule stipulating that equivalent securities or bundles of securities must sell at equal prices to preclude arbitrage opportunities.

Relative Strength

The extent to which a security has outperformed or underperformed either the market as a whole or its particular industry.