doubt about the Function of Discount in the treeage

Hi, Andrew Munzer

 

I have a doubt about the Function of Discount in the treeage.

 

We assume parameters in the model are as follows:

Time horizon=10 years

Cycle length=3 weeks

_stage=10*365/3*7=173

Cost_drug_annually=1200

Annually_rate=0.03

 

 

My question is which of the formulas used to calculate the discount cost in the treeage software is correct? And could you kindly explain the specific calculation process inside the software?

 

  1. Discount (1200*21/365; 0.03; _stage )
  2. Discount (1200*21/365; 0.03; _stage/12 )

 

Thanks 

 

Best regards

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Comments

2 comments
  • The Discount function is described in the Help files, but it is better and easier to use the Global Discounting option in Tree Preferences > Calculation > Payoffs > Discounting.

    1. Check the box.
    2. Enter a custom cycle length 21/365
    3. Enter the annual rate for each payoff you want discounted.

    This will automatically apply the equivalent calculation as the Discount function to all entries for the payoff set.

    If you choose to use the Discount function, then the expression would be...

    Discount(YourValue; 0.03; _stage*21/365)

     

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  • Hi,Andrew  

     

    Thanks for your reply. Very helpful!

     

    Best regards

     

    Ziji

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