Question

Risk Mgt. Tools and Methods in Performing Quantitative Analysis. Review the process below illustrated in your (PMI, 2009, p.41).   Describe two useful methods to “perform quantitative analysis”   

Answer 1

ANSWER

Describe two useful methods to " perform quantitative analysis"

                  Quantitative analysis is the process of collecting and evaluating measurable and verifiable data such as revenues, market share, and wages in order to understand the behavior and performance of a business. in the past, business owners and company directors relied heavily on their experience and instinct when making decisions. However, with the era of data technology, quantitative analysis is now considered a better approach to making informed decisions. A Quantitative analyst's main task is to present a given hypothetical situation in terms of numerical values. Quantitative analysis helps in evaluating performance, assessing financial instruments and making predictions. It encompasses three main methods of measuring data:

1. Regression analysis

2. Linear programming

3. Data Mining

1. Regression Analysis

             Regression analysis is a common method that is not only employed by business owners but also by statisticians and economists. It involves using statistical equations to predict or estimate the impact of one variable on another. For instance, regression analysis can be used to determine how interest rates affect consumers behavior regarding asset investment. one other core application of regression analysis is establishing the effect of education and work experience on employees annual earnings.

         In the business sector , owners can use regression analysis to determine the impact of advertising expenses on business profits. by using this approach , a business owner can establish whether there is a positive or negative correlation between two variables.

2. Linear programming

           Most companies occasionally encounter a shortage of resources as facility space, production machinery and labor. in such situations, company managers must find ways to allocate resources effectively. Linear programming is a quantitative method that determines how to achieve such an optimal solution. It is also used to determine how a company can make optimal profits and reduce its operating costs, subject to a given set of constraints such as labor.

3. Data Mining

           Data Mining is a combination of computer programming skills and statistical methods. The popularity of data mining continues to grow in parallel to the increase in the quantity and size of available data sets. Data mining techniques are used in evaluating very large sets of data, with the aim of finding patterns or correlations concealed within them.