Sensitivity Analysis: Definition, Uses & Importance

The technique used to determine how independent variable values will impact a particular dependent variable under a given set of assumptions is defined as the sensitivity analysis. Its usage will depend on one or more input variables within the specific boundaries, such as the effect that changes in interest rates will have on a bond’s price.

It is also known as the what – if analysis. Sensitivity analysis can be used for any activity or system. All from planning a family vacation with the variables in mind of the decisions at corporate levels can be done through sensitivity analysis.