What are the benefits and limitations of using Monte Carlo simulation for scenario analysis in CRE?
Scenario analysis is a powerful tool for commercial real estate (CRE) investors and developers to assess the risks and returns of different outcomes for a project or portfolio. It involves creating and comparing multiple scenarios based on different assumptions and variables, such as market conditions, occupancy rates, rental growth, expenses, financing, and exit strategies. However, traditional scenario analysis can be limited by the number and range of scenarios that can be realistically considered, as well as the difficulty of assigning probabilities to each scenario. That's where Monte Carlo simulation comes in.
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Dr. Ivan Andric, PhD, ScD, MBAFinance-Focused Sustainability Expert | 15 Years in ESG Strategy, Climate Risk, and Corporate Finance | Innovating…
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Anthony MinissaleInvestment banker
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Samir BhandariCo-Founder and CFO @ hBits | Ex MD - Nomura | JP Morgan | UBS | Bank of America | IIM-A | CA | Banker for more than 3…