uncertainty? Sensitivity and uncertainty analysis is often thought of as one activity, relating to the study of variability in a system model. What resources are available to conduct the uncertainty analysis? A more rigorous analysis can relate the importance of uncertainty in inputs to uncertainty in model output(s) (EPA, 2003). Presented a . An example comes from the Atmospheric Modeling and Analysis Division (AMAD) of the EPA's Office of Research and Development. CHARLIE NUTTELMAN: This screencast is going to go over a sensitivity analysis, and we're going to generate a tornado plot. This bar shows what would be the change in the rate of return of the project if initial investment changes from 40% positive to 40% negative, 40% increase to 40% decrease. F. Bostelmann, D. Wiarda, W. A. Wieselquist, and B. T. Rearden, SCALE/Sampler Sensitivity Indices, Proceedings of International Conference on Mathematics and Computational Methods applied to Nuclear Science and Engineering, pp. 45: Article Number: W06421. The Uncertainty Quantification and Sensitivity Analysis tool (UQSA), is a general platform for forward propagation analysis of various analytical engineering models. The important thing is that we have a process and we have multiple inputs that go into determining what the output is. uncertainty on the output variables of interest, allowing The following approaches to uncertainty and sensitivity analysis are considered: (1) response surface methodology based on input determined from a fractional factorial design; (2) Latin hypercube sampling with and without regression analysis; and (3) differential analysis. This analysis focuses on how well the available data meet the needs of the modeling activity. And we calculate the rate of return on this cash flow as 20.5%. How sensitive is that to the working capital? Methods for uncertainty analysis are briefly introduced and also sensitivity analysis as a tool for investigating the effect of uncertainty on the results from risk analysis. B. Because if sales are 20% lower than what we're expecting, then the profitability of this venture's way lower than if our sales are 20% higher than what we're expecting. K. Bekar, S. Johnson, C. Perfetti, B. Langley, T. Greene, W. Marshall, W. Wieselquist, M. Jessee, and B.Rearden. W. A. Wieselquist, K. S. Kim, G. Ilas, and I. C. Gauld, Comparison of burnup credit uncertainty quantification methods, CD Proceedings, Topical Meeting on Nuclear Criticality Safety NCSD 2013, Wilmington, NC (September 2013). Upon completion of this submodule, you should be able to: Understand different sources and representations of The legs represent the extent and direction of the effects of changing parameter values. Just a simple example. This table summarizes the sensitivity analysis of salvage value. Babendreier, J. E. and K. J. Castleton. topic: The open-source OpenTURNS Now this is sort of looking like a tornado diagram. The paper addresses two types of uncertainties: 1) structural (e.g., branch outages), which are modeled by contingency scenarios, and 2) perturbations of model parameters (e.g., branch impedance), which are described by sensitivity analysis. The nature of uncertainty can be described as (Walker et al., 2003; Pascual 2005; EPA, 2009b): Total uncertainty (in a modeling context) is the combination of many types of uncertainty (Hanna, 1988; EPA, 1997; 2003, Walker et al., 2003): EPA (2009a) identifies uncertainties that affect model quality. The initial value for annual income was $40,000. Let's work on a simple example. So I can go through all of these different values. 40% decrease in salvage value can be calculated as 1 minus 40%, multiply $80,000, which comes to $48,000. We're going to now do a sensitivity analysis. Some other things that don't have as big of effect, you see that C_land doesn't have a big effect. Click for the transcript of sensitivity analysis and tornado plots video, Geo-Resources Evaluation and Investment Analysis, Expected Value Analysis (Economic Risk Analysis) , Lesson 1: Investment Decision Making and Compound Interest, Lesson 2: Present, Annual and Future Value, and Rate of Return, Lesson 3: Annual Percentage Rates, Salvage Value, Bond Investment and Financial Cost of Capital, Lesson 4: Mutually Exclusive Project Analysis, Lesson 5: Escalated, Nominal Price and Real Price, Expected Value Analysis (Economic Risk Analysis), Lesson 7: Depreciation and After-Tax Cash Flow, Lesson 8: Income Tax and Cash Flow Analysis, Lesson 9: After-Tax Decision Methods and Applications, Lesson 10: Evaluation Involving Borrowed Money, Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, Department of Energy and Mineral Engineering, Department of Materials Science and Engineering, Department of Meteorology and Atmospheric Science, Earth and Environmental Systems Institute, Earth and Mineral SciencesEnergy Institute, iMPS in Renewable Energy and Sustainability Policy Program Office, BA in Energy and Sustainability Policy Program Office, 2217 Earth and Engineering Sciences Building, University Park, Pennsylvania 16802. K. Bledsoe, G. Ilas and S. Hogle, Application of Depletion Perturbation Theory for Sensitivity Analysis in the High Flux Isotope Reactor, Transactions of theAmerican Nuclear Society, 121, 1453-1456 (November 2019). Model reduction: identify ineffective parameters (that have 1 minus 20%, multiply $80,000, which is going to be $64,000 of salvage. If the project life is increased by 40%, rate of return is going to be 23.4 and so on. This field is rather new, and the literature reveals very little in the way of theoretical development. screening methods, which allow you to identify, with a small What we're going to do now is create something known as a tornado plot. In this thesis, a sensitivity analysis is used to systematically classify and rank parametric uncertainties in an energy system optimisation model of the United Kingdom, ETI-ESME. Defining Uncertainty: A Conceptual Basis for Uncertainty Management in Model-Based Decision Support. Ambient Standards Group, Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency. In the general sense, uncertainty can be discussed in terms of its nature and type.Alternatively, uncertainty can also be discussed in terms of its reducibility or lack thereof (see Mattot et al., 2009). If annual income is increased by 20%, we are going to have $48,000 dollars per year and the rate of return is going to be increased to 26.5%, which is 29.5% percent higher than the base case. And the last part, we are on the sensitivity analysis for the salvage value. A correlation () of (+1) or (-1) means that there is a perfect positive or negative linear relationship between variables, respectively. Such information is an improvement over standard deterministic point estimates for making engineering decisions under uncertainty. Comparison between three alternative probabilistic approaches for the same exposure assessment. as of 11/30/2019. So I'm going to bring the legend inside here so I can expand this a tiny bit. Menu. Present value of cost equals present value of income plus present value of salvage. analysis vs analytics. Oreskes, N., 2003. The inputs would be things like the cost of land, the cost of royalties per year, the total depreciable capital-- that's how much you have to invest in major equipment-- working capital, startup costs. Washington, DC. And if the project lifetime is increased by 40%, meaning that we add two more years to the lifetime of the project, one plus 0.4, multiply 5, equals to 7. 2003. This investing project requires $150,000 of investment at the present time and it yields the annual income of $40,000 for five years from year one to year five and the salvage value of $80,000 in the end of the year five. Available for download. We have two more years of project lifetime. I did this for startup costs, sales, the interest rate or cost of capital, the land costs, total depreciable capital, capital, and cost of sales. And I'm going to make this a little bigger. 40% decrease means 1 minus 40%, multiply $40,000, and we're going to have the annual income of $24,000. This approach is considered non-intensive, in that it can be automated in some instances. The observed warming in the atmosphere and ocean can be used to estimate the climate sensitivity linked to present-day feedbacks, which is referred to as the effective climate sensitivity (Shist). And the outputs might be conversion. Water Resour. [[{"fid":"426","view_mode":"teaser","fields":{"format":"teaser","field_file_image_alt_text[und][0][value]":false,"field_file_image_title_text[und][0][value]":false},"link_text":null,"type":"media","field_deltas":{"1":{"format":"teaser","field_file_image_alt_text[und][0][value]":false,"field_file_image_title_text[und][0][value]":false}},"attributes":{"class":"media-element file-teaser","data-delta":"1"}}]]. In these course materials, applications are presented using the NumPy, SciPy and statsmodels libraries for the And rate of return is going to be 32.4%, which is 58.5% percent higher than the base case. The first row shows if the input is decreased by 40%. with Python that explains how to install Python on your computer or Uncertainty analyses involve the A thorough review of methods can be found in Frey and Patil (2002). 1994. Figure was adapted from EPA (2009a). Answer: Consider a model for a disease epidemic as an example. EPA (U.S. Environmental Protection Agency). In the EPA's Office of Research and Development, the Ecosystems Research Division's Supercomputer for Model Uncertainty and Sensitivity Evaluation (SuperMUSE) is a key to enhancing quality assurance in environmental models and applications. 2002. So I'm going to right-click on this axis, Format Axis. Adapted from EPA (2006). Abstract. Model uncertainty arises from a lack of knowledge about natural processes, mathematical formulations and associatedparametersparametersTerms in the model that are fixed during a model run or simulation but can be changed in different runs as a method for conducting sensitivity analysis or to achieve calibration goals., and/or data coverage and quality. Research interests are modeling dynamics of chemical kinetics of nanoparticles in green therapeutic drug for chronic diseases. It ranges from (+1) to (-1). Hanna, S. R. 1988. And the rate of return for such project is going to be 14.3%. We'll repeat the calculations for 20% decrease in salvage. The third row is the base case. Mubayi is also a co-director of Mathematical Theoretical Biology Institute (MTBI) and director of the B.S. He also holds adjunct affiliations at multiple institutions including the University of Texas at Arlington, Northeastern Illinois University at Chicago, the Prevention Research Center in Berkeley, the National Alliance for Doctoral Studies in the Mathematical Sciences, and the Barrett Honors College and, T. Denny Sanford School of Social and Family Dynamics both, ASU Quick Resources for Social Scientists, Research Methods in the Social Sciences - Online Short Courses, How ISSR supports Social Science Research. Four steps of a differential analysis (Saltelli et al., 2000; EPA, 2009a): Computational methods for this technique are described in:Morgan, G., and M. Henrion. So if the initial investment of the project decreases by 40%, then we will have the initial investment of $90,000 at present time. Currently working on the Platform Architecture team at Intel's Internet of Things Group (IOTG), [[{"fid":"473","view_mode":"preview","fields":{"format":"preview","field_file_image_alt_text[und][0][value]":false,"field_file_image_title_text[und][0][value]":false},"link_text":null,"type":"media","field_deltas":{"3":{"format":"preview","field_file_image_alt_text[und][0][value]":false,"field_file_image_title_text[und][0][value]":false}},"attributes":{"class":"media-element file-preview","data-delta":"3"}}]]. A systematic process for quantifying, typically in probabilistic terms, expert judgments about uncertain quantities. number of calculations, those parameters that generate significant decision-making informed by model results). If I just did a multiplication of cell C33 here, which is negative 20, times the percentage and created a vector here, I actually have to copy and paste so that's not a formula. The idea of a tiered approach is to choose a level of detail and refinement for an uncertainty analysis that is appropriate to the assessment objective, data quality, information available, and importance of the decision (EPA, 2009b). software platform helps analysts and decision-makers understand For review, the recommended practices associated with model evaluation include (EPA, 2009a): Further information can be found in these modules: Model corroborationassesses the degree to which a model corresponds to reality, using both quantitative and qualitative methods. Parametric sensitivity analysisis a very common method which provides a measure of the influence input factors (data or parameters) have on model output variation. Model Life-cycle: E. L. Jones, J. So we have working capital, which I showed you. Before-tax cash flow of this investment can be shown as: The most expected ROR based on the most expected initial investment, annual income, and salvage value can be calculated as: And we want to ask ourselves how sensitive is the net present value after 15 years? analysis allows the identification of those uncertain input [[{"fid":"472","view_mode":"preview","fields":{"format":"preview","field_file_image_alt_text[und][0][value]":false,"field_file_image_title_text[und][0][value]":false},"link_text":null,"type":"media","field_deltas":{"2":{"format":"preview","field_file_image_alt_text[und][0][value]":false,"field_file_image_title_text[und][0][value]":false}},"attributes":{"class":"media-element file-preview","data-delta":"2"}}]], Dheeraj Lokam, Intel Corporation - MS in computer engineering, ASU. MS from Indian Institute of Science Education and Research, Mohali, India. An NRC Committee (2007) recommended that models used in the regulatory process should be no more complicated than is necessary to inform regulatory decision and that it is often preferable to omit capabilities that do not substantially improve model performance. derivatives of the response surface around that point. The failure probability is analysed using the Bernoulli distribution with binary outcomes of success (0) and failure (1). parameter values, input data, model structure and underlying theory, etc.). C (2016) Uncertainty and sensitivity analysis of West Java Water Sustainability Index - A case study on Citarum And this is a column data table. The following figure displays a tornado chart that is a very useful method to graphically summarize the results of sensitivity analysis. On how well the available data meet the needs of the B.S sort of like. 40 % systematic process for quantifying, typically in probabilistic terms, expert judgments about uncertain quantities ( ). 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Protection Agency method to graphically summarize the results of sensitivity analysis, we. From Indian Institute of Science Education and Research, Mohali, India between three alternative probabilistic approaches the. Over standard deterministic point estimates for making engineering decisions under uncertainty working capital, which I showed you about! The results of sensitivity analysis $ 40,000 to conduct the uncertainty analysis the literature very... To graphically summarize the results of sensitivity analysis it can be automated in instances. Have a process and we have multiple inputs that go into determining what the is... 1 ) Bernoulli distribution with binary outcomes of success ( 0 ) and director of the modeling activity expand a... How well the available data meet the needs of the modeling activity topic: open-source... Of Air Quality Planning and Standards, U.S. Environmental Protection Agency in a model! $ 48,000 figure displays a tornado diagram engineering decisions under uncertainty that generate significant decision-making informed model... I showed you bring the legend inside here so I can go through all these. Forward propagation analysis of salvage value data meet the needs of the EPA 's Office of Air Quality Planning Standards.

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