Risk Analysis in Investment Appraisal
AbstractThe methodology and uses of Monte-Carlo simulation technique are presented as applied to the analysis and assessment of risk in the evaluation of investment projects. The importance of risk analysis in investment appraisal is highlighted and the stages in the process introduced. The results generated by a risk analysis application are interpreted, including the investment decision criteria and measures of risk based on the expected value concept. Conclusions are drawn regarding the usefulness and limitations of risk analysis in investment appraisal.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 10035.
Date of creation: Mar 1994
Date of revision: 14 Aug 2008
Publication status: Published in Project Appraisal 1.Volume(1994): pp. 3-18
risk analysis; investment appraisal; Monte Carlo simulation; project evaluation; measures of risk; investment decision criteria;
Other versions of this item:JEL classification:
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-21 (All new papers)
- NEP-PPM-2008-08-21 (Project, Program & Portfolio Management)
- NEP-RMG-2008-08-21 (Risk Management)
- NEP-UPT-2008-08-21 (Utility Models & Prospect Theory)
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- Savvides, Savvakis C., 2000. "Market Analysis and Competitiveness in Project Appraisal," MPRA Paper 9796, University Library of Munich, Germany.
- Georgios Tziralis & Konstantinos Kirytopoulos & Athanasios Rentizelas & Ilias Tatsiopoulos, 2009. "Holistic investment assessment: optimization, risk appraisal and decision making," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(6), pages 393-403.
- Glenn Jenkins & Chun-Yan Kuo & Arnold C. Harberger, 2011. "Cost-Benefit Analysis for Investment Decisions: Chapter 6 (Dealing With Uncertainty and Risk in Investment Appraisal)," Development Discussion Papers 2011-06, JDI Executive Programs.
- Lenz, Rainer, 2008. "The Logic of Merger and Acquisition Pricing," MPRA Paper 26627, University Library of Munich, Germany.
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- Glenn Jenkins & Tumani Dembajang, . "Integrated Appraisal Of A Regional African Satellite Project," Development Discussion Papers 2005-02, JDI Executive Programs.
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