Week 5: Random Generator and Statistical Functions

ACTL 2111/ACTL5102 Financial Mathematics

Excel tutorial series

Xinda Yang

© University of New South Wales (2017)

School of Risk and Actuarial Studies, UNSW Business School
xinda.yang@unsw.edu.au

Week 5:
Random Generator and Statistical Functions 1

1
1/16 Reference: link
 Week 5: Random Generator and Statistical Functions

1 Goals

2 Distributions in Excel

3 Simulation

4 Statistical analysis

2/16
 Week 5: Random Generator and Statistical Functions
Goals

1 Goals

2 Distributions in Excel

3 Simulation

4 Statistical analysis

3/16
 Week 5: Random Generator and Statistical Functions
Goals

Goals of this tutorial

By the end of this tutorial, you should be able to

use Excel to simulate random observations
perform preliminary statistical analysis

4/16
 Week 5: Random Generator and Statistical Functions
Distributions in Excel

1 Goals

2 Distributions in Excel

3 Simulation

4 Statistical analysis

5/16
 Week 5: Random Generator and Statistical Functions
Distributions in Excel

Normal distribution

NORM.DIST(x,mean,standard_dev,cumulative)
mean and standard_dev are parameters of a normal r.v.
cumulative: TRUE for c.d.f. and FALSE for p.d.f.
x: the value where the function will be evaluated
link to official support

6/16
 Week 5: Random Generator and Statistical Functions
Distributions in Excel

Normal distribution

NORM.INV(probability,mean,standard_dev)
mean and standard_dev are parameters of a normal r.v.
probability: the (cumulative) distribution
link to official support

7/16
 Week 5: Random Generator and Statistical Functions
Distributions in Excel

Normal distribution

What is the result of

NORM.INV(NORM.DIST(5,2,3,TRUE),2,3)
NORM.DIST(NORM.INV(0.8,2,3),2,3,TRUE)

8/16
 Week 5: Random Generator and Statistical Functions
Distributions in Excel

Distributions in Excel

There are more distributions in Excel

They can be found at Formulas → More Functoins →
Statistical
Most of them allow for both distribution (c.d.f. and p.d.f./p.m.f.)
and inverse c.d.f. calculations (Poisson is an exception -
inverse c.d.f. is not included).
Excel also offer functions that are compatible with older
versions
e.g. NORMDIST, NORMINV
avoid using these since they may not be available in future
versions

9/16
 Week 5: Random Generator and Statistical Functions
Simulation

1 Goals

2 Distributions in Excel

3 Simulation

4 Statistical analysis

10/16
 Week 5: Random Generator and Statistical Functions
Simulation

Generating uniform random values

The most basic simulation is to genrate uniform random variables

RAND(): generate uniform values between 0 and 1
RANDBETWEEN(); generate uniform values between two
specified numbers

11/16
 Week 5: Random Generator and Statistical Functions
Simulation

Manual calculation I

Both RAND() and RANDBETWEEN() functions return a new ran-

dom value every time the worksheet is calculated
Formulas → Calculation → Calculation Options: select
Manual
This will stop Excel from automatic calculation
Keep the current results (for error checking, etc)
Reduce the calculation load (e.g. having thousands of
simulations and complex calculation)

12/16
 Week 5: Random Generator and Statistical Functions
Simulation

Manual calculation II

Manually enable the calculation

update the whole workbook: F9 or use Formulas →
Calculation → Calculation Now
update only one worksheet: Formulas → Calculation →
Calculation Sheet

13/16
 Week 5: Random Generator and Statistical Functions
Simulation

Generating random values of a continuous distribution

Continuous random variables with closed-form FX−1 can be gener-

ated via the inverse transformation.
if U ∼ unif(0,1), then FX−1 (U ) ∼ FX . (you can try to prove this
yourself !)
Algorithm
Determine FX−1 (x )
Generate random observations, u1 , . . . , un , following the
Unif(0,1) distribution e.g. via RAND()
Transform the uniform observations by using the FX−1 (ui ) for
i = 1, . . . , n

14/16
 Week 5: Random Generator and Statistical Functions
Statistical analysis

1 Goals

2 Distributions in Excel

3 Simulation

4 Statistical analysis

15/16
 Week 5: Random Generator and Statistical Functions
Statistical analysis

Some useful functions

statistical: SUM, COUNT, AVERAGE, MAX, MIN, ABS,

MEDIAN, MODE, STDEV.P, STDEV.S, VAR.P, VAR.S
statistical+logical: SUMIF, SUMIFS, COUNTIF, COUNTIFS,
AVERAGEIF, AVERAGEIFS
Note:
A colon(:) - a range of cells
A comma (,) - two cells

16/16