Risk in Transport Investments
We discuss how the standard Cost-Benefit Analysis should be modified in order to take risk (and uncertainty) into account. We propose different approaches used in finance (Value at Risk, Conditional Value at Risk, Downside Risk Measures, and Efficiency Ratio) as useful tools to model the impact of risk in project evaluation. After introducing the concepts, we show how they could be used in CBA and provide some simple examples to illustrate how such concepts can be applied to evaluate the desirability of a new project infrastructure.
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- Pindyck, Robert S, 1993. "A Note on Competitive Investment under Uncertainty," American Economic Review, American Economic Association, vol. 83(1), pages 273-77, March.
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- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, March.
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