What does a 2D sensitivity table assess?

A 2D sensitivity table specifically assesses two-variable interactions, making it a powerful tool for understanding how changes in two different variables impact outcomes simultaneously. By displaying results for two related variables, this type of table allows analysts to visualize the relationship between these variables and the resulting effects on a particular outcome, such as net present value or cash flow.

The utility of a 2D sensitivity table lies in its ability to capture the intricacies of how two factors influence each other and the outcomes, which is essential in real estate finance where multiple variables often interact. This understanding enables investors and finance professionals to make more informed decisions by identifying potential risks and opportunities that may not be apparent when considering each variable in isolation or using a simpler, single-variable approach.

In contrast, a 2D sensitivity table does not measure single-variable outcomes, which would only involve analyzing how changing one variable affects the outcome without considering the interaction with another variable. It also doesn’t evaluate overall market performance, as that would typically require a broader analysis not confined to the interaction of just two variables. Individual investment strategies, while they may indirectly benefit from insights derived from such a table, are not the focus of a 2D sensitivity table either.