IDEAS home Printed from
   My bibliography  Save this article

Probabilistic Approaches in Investment Decision Making and their Implementation


  • Jiří Fotr
  • Lenka Švecová


The success of investment projects depends largely on the quality of integration of risks and uncertainty in the process of preparation of these projects, their evaluation and decisions on acceptance or rejection. This article first characterizes the shortcomings of traditional onescenario approach for evaluating projects within investment decision making. The main focus is on probabilistic tools, mainly on scenarios and Monte Carlo simulation. The article characterizes principles of the tools, their common features and differences, examples of usage in the investment decision making. Also covered are strengths and weaknesses of the tools, and application of Monte Carlo simulation in risk analysis of investment projects is illustrated on practical example. In conclusion, the article discusses barriers of implementation of scenarios and Monte Carlo simulation and proposes a set of recommendations increasing the success of integration of these tools into the investment decision making.

Suggested Citation

  • Jiří Fotr & Lenka Švecová, 2010. "Probabilistic Approaches in Investment Decision Making and their Implementation," Ekonomika a Management, University of Economics, Prague, vol. 2010(1).
  • Handle: RePEc:prg:jnleam:v:2010:y:2010:i:1:id:85

    Download full text from publisher

    File URL:
    Download Restriction: free of charge

    File URL:
    Download Restriction: free of charge

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 21(1), pages 1-4, January.
    Full references (including those not matched with items on IDEAS)

    More about this item


    analýza rizika; risk analysis; Investiční projekty; Riziko; Scénáře; Simulace Monte Carlo; Investment projects; Risk; Scenarios;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prg:jnleam:v:2010:y:2010:i:1:id:85. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Frantisek Sokolovsky). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.