Question

What is the advantage of risk analysis over sensitive analysis and scenario analysis?

Answer 1

Explanation:

Sensitivity analysis is a method for predicting the outcome of a decision if a situation turns out to be different compared to the key predictions. It helps in assessing the riskiness of a strategy.

Helps in identifying how dependent the output is on a particular input value.

Answer 2

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As sensitivity analysis studies each variable independently, it can identify critical variables that may act as a weakness. For example – In this analysis, we find out that the bond prices are extremely volatile to changes in inflation, we can take measures to reduce the impact, say by hedging.