Excel and VBA Functions for Correlation Covariance and Variance

The correlation between two variables can be calculated in Excel using the Correl() function. Covariance can be calculated using the Covar() function. Given a sample of risk indicators or OR events, the variance and standard deviation are best calculated using the Var() and Stdev() functions, respectively. An alternative, if we have the entire population, is to use the TABLE 3.4 Subjective Probabilities of System Downtime Provided by Total cost 12,GGG + ( 1,125 x X ) Expected cost 12,GGG + (...

The Law Of Significant Digits

Benford's law of significant digits states that a sample of the first significant and subsequent digits of numbers drawn from a wide variety of random probability distributions will have a certain form as the sample size becomes increasingly large. The law is actually based on a conjecture by the astronomer and mathematician Simon Newcomb. In a two-page article in 1881 in the American Journal of Mathematics, Newcomb conjectured that the probability that a number has first significant digit d is...

Useful Excel Functions

Excel has many probability and related functions of value in OR management. One of the most useful is the Percentile function, which returns the percentile of a given data set. It is illustrated in the workbook Operational Risk 02.xls worksheet Case study 2.2 and also discussed further in review question 6 below. Other valuable functions include the Normsinv , which calculates the percentile function for a standard normally distributed random variable, and Normsdist , which calculates the...

With Excel and VBA

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