The difference between simulations and other techniques such as scenario analysis and decision trees, is that:

I. there is no constraint on how many variables can be allowed to vary.
II. simulations yield better estimates of expected value than conventional risk-adjusted value models.
III. simulations lead to better decisions.

Correct Answer: I only

I: This is true in theory. In practice, analysts should focus on a few variables that have a significant impact on value.

II is false. They should be quite close.

III is false. This may not always be the case, due to misuses of risk measures.