JAMES F. WRIGHT, Ph.D Ltd. Co.

"Monte Carlo Risk Analysis and Due Diligence of New Business Ventures"

by James F. Wright, PhD


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TABLE OF CONTENTS
(The Starting Page Number is Listed for each Chapter
to help the reader determine its content.)




TABLE OF CONTENTS (Starting Page vii)
LIST OF FIGURES (Starting Page xi)
LIST OF TABLES (Starting Page xiii)
PREFACE (Starting Page xv)
ACKNOWLEDGEMENTS (Pages xix through xxi)
PART I - WHAT IS TECHNICAL DUE DILIGENCE?
CHAPTER 1 - INTRODUCTION (Starting Page 1)
The Definition of Technical Due Diligence
The Process of Technical Due Diligence
Technical Systems Analysis
Technical Risk Analysis

CHAPTER 2 - TECHNOLOGIES, INVESTORS, BUSINESS, AND TECHNICAL DUE DILIGENCE (Starting Page 18)
What is a Technical Project?
The Sources of Technical Projects
How Good is a Technical Project?
Bringing Technical Concepts to the Market
The Business Plan and Who Writes It
Investors in Technical Projects

CHAPTER 3 - TECHNICAL SYSTEMS ANALYSIS (Starting Page 37)
The Technical Scope of the Project
Evaluating the Business Plan in Technical Systems Analysis
Non-Technical Information on the Product or Service
Competition in the Market Place
The Importance of Mrketing & Sales
Legal & Regulatory Issues
Economic Factors and Technical Due Diligence
Other Elemetns of Technical Systems Analysis in the Business Plan

CHAPTER 4 - TECHNICAL RISK ANALYSIS USING MONTE CARLO SIMULATION (Starting Page 51)
What is Risk Analysis?
The New Paradigm
The Investor-Selected Metric
The Risk-Based Investment Factor (RBIF)
Input Data to Distribution Functions
The Calculations and Their Meaning

CHAPTER 5 - THE TECHNICAL DUE DILIGENCE TEAM (Starting Page 78)
The Project Manager
Qualifications of the Project Manager
Responsibilities of the Project Manager
The Due Diligence Team
When is A Due Diligence Team Required?
Qualifications of Team Memebers

CHAPTER 6 - WORKING EXAMPLES (Starting Page 86)
Using MCGRA
The CD
MCGRA
Example 1
Example 2
PART II - THE TOOLS FOR TECHNICAL DUE DILIGENCE
CHAPTER 7 - PROCESS ANALYSIS (Starting Page 159)
The Single Process System
Multiple Process Systems
Components in Series
Components in Parallel
Unrevealed Features
Failures Due to Coincidence
Process Analysis
Fault Tree Analysis
Event Tree Analysis
Size & Scale
Capital & Operating Costs

CHAPTER 8 - ERROR ANALYSIS (Starting Page 197)
How is Error Related to Risk?
Propagation of Errors Using Differential Method
Propagation of Errors Using Monte Carlo Simulation
Uncertainty in Future Predictions

CHAPTER 9 - MATHEMATICAL SIMULATION AND THE MONTE CARLO METHOD (Starting Page 207)
Some Basic Definitions
Mathematical Simulation
Types of Simulators
Uses of Simulation
The Monte Carlo Risk Analysis
Historical Perspective
The Monte Carlo Method
Random Number Generation
Variance Reduction and Antithetic Variables
The advantage of Distributions
Monte Carlo Sample

CHAPTER 10 - BASIC PROBABILITY WITH BINOMIAL & POISSON DISTRIBUTIONS (Starting Page 235)
Possibility, Probability and the Toss of a Stupid coin
Rolling Stupid Dice
Binomial Distribution
Poisson Distribution

CHAPTER 11 - PROBABILITY AND DISCRETE NORMAL DISTRIBUTIONS (Starting Page 256)
Defining the Terms
Practical Use of Discrete Distributions

CHAPTER 12 - PROBABILITY AND CONTINUOUS NORMAL DISTRIBUTIONS (Starting Page 272)
Defining the Terms
Practical Use of Continuous Distributions
Normal Distributions
The Variance and Standard Deviation
So Many Distributions! - Which do I Use?

CHAPTER 13 - TRIANGULAR AND OTHER DISTRIBUTION FUNCTIONS (Starting Page 286)
Triangular Distributions
Probabilities
Writing the Monte Carlo Program
The Variance and Santdard Deviation
Constant Distribution
Bathtub Distribution

CHAPTER 14 - GAUSSANGULAR DISTRIBUTIONTM (Starting Page 299)
The "General Angular Distributions"
Symmetrical Gaussangular Distribution
Unsymmetrical Gausangular Distributions
The Variance and Standard Deviation
Writing the Monte Carlo Program
Symmetrical Functions for Monte Carlo
Unsymmetrical Functions for Monte Carlo

INDEX (Starting Page 334)


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(Last Modified 10/15/02)