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Incorporating uncertainty in optimal investment decisions

Author

Listed:
  • Athanasios Rentizelas
  • Georgios Tziralis
  • Konstantinos Kirytopoulos

Abstract

Investment decisions are now more crucial than ever. The investors are in need of sound arguments, which will be able to shape the investment specifications and appraise their uncertain nature. This paper proposes an innovative approach that merges optimisation and risk analysis in one single method. The two-step investment appraisal approach reaches an optimum through a Genetic Algorithm optimisation and then assesses the environment's risk through a Monte Carlo simulation. The approach, thus, offers the best investment characteristics, as well as information about its implied risk. The use of the method is illustrated through an extensive Case Study.

Suggested Citation

  • Athanasios Rentizelas & Georgios Tziralis & Konstantinos Kirytopoulos, 2007. "Incorporating uncertainty in optimal investment decisions," World Review of Entrepreneurship, Management and Sustainable Development, Inderscience Enterprises Ltd, vol. 3(3/4), pages 273-283.
    • Handle: RePEc:ids:wremsd:v:3:y:2007:i:3/4:p:273-283
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    Citations

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    Cited by:

    1. Tolis, Athanasios I. & Rentizelas, Athanasios A. & Tatsiopoulos, Ilias P., 2010. "Optimisation of electricity energy markets and assessment of CO2 trading on their structure: A stochastic analysis of the Greek Power Sector," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(9), pages 2529-2546, December.
    2. Tolis, Athanasios I. & Rentizelas, Athanasios A. & Tatsiopoulos, Ilias P., 2010. "Time-dependent opportunities in energy business: A comparative study of locally available renewable and conventional fuels," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(1), pages 384-393, January.

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