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Sensitivity analysis is the study of the impact that changes in one or more variables of a decision-making model have on other variables.

A financial model called sensitivity analysis, analyses how changes in input factors, or other variables, affect target variables. It is a technique for forecasting a decision's outcome given a set of relevant factors.

The two basic methods for assessing sensitivity are as follows: Analysis of local sensitivity and Analysis of global sensitivity.

Making decisions can benefit from sensitivity analysis in a number of ways. It first serves as a thorough analysis of all the variables.

The predictions might be much more accurate because it's more thorough. Second, it enables decision-makers to pinpoint areas where future improvements can be made.

The procedures we take to undertake a sensitivity analysis are as follows:

The model's base case should be defined; Using the same set of assumptions as before, compute the output variable for a new input variable; Divide the percentage change in the output variable over the percentage change in the input variable to find the sensitivity.

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