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Risk Analysis in Investment Appraisal

Author

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  • Savvakis C. Savvides

    (The Cyprus Development Bank)

Abstract

This paper was prepared for the purpose of presenting the methodology and uses of the Monte Carlo simulation technique as applied in the evaluation of investment projects to analyse and assess risk. The first part of the paper highlights the importance of risk analysis in investment appraisal. The second part presents the various stages in the application of the risk analysis process. The third part examines the interpretation of the results generated by a risk analysis application including investment decision criteria and various measures of risk based on the expected value concept. The final part draws some conclusions regarding the usefulness and limitations of risk analysis in investment appraisal.

Suggested Citation

  • Savvakis C. Savvides, 2004. "Risk Analysis in Investment Appraisal," Finance 0409020, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpfi:0409020
    Note: Type of Document - pdf; pages: 33
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0409/0409020.pdf
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    Citations

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    Cited by:

    1. Glenn Jenkins & Tumani Dembajang, "undated". "Integrated Appraisal Of A Regional African Satellite Project," Development Discussion Papers 2005-02, JDI Executive Programs.
    2. Miranda Sarmento, J. & Renneboog, L.D.R., 2014. "Public-Private Partnerships : Risk Allocation and Value for Money," Discussion Paper 2014-017, Tilburg University, Tilburg Law and Economic Center.
    3. Migara S. Jayawardena & Glenn Jenkins & Mario Marchesini, "undated". "Fourth Fisheries Project In Bangladesh an Integrated Project Analysis," Development Discussion Papers 1998-08, JDI Executive Programs.
    4. Salci, Sener, 2017. "An Integrated Appraisal of the Péligre Electricity Transmission Line Rehabilitation Investment," MPRA Paper 78929, University Library of Munich, Germany.
    5. Sener Salci & Glenn P. Jenkins, 2016. "Incorporating Risk and Uncertainty in Cost-Benefit Analysis," Development Discussion Papers 2016-09, JDI Executive Programs.
    6. MIGARA JAYAWARDENA & Glenn Jenkins & GANGADHAR SHUKLA, 1999. "Control Of Water And Coastal Pollution An Appraisal For Espirito,Brazil," Development Discussion Papers 1999-04, JDI Executive Programs.
    7. Lenz, Rainer, 2008. "The Logic of Merger and Acquisition Pricing," MPRA Paper 26627, University Library of Munich, Germany.
    8. Savvakis C. Savvides, 2016. "Overcoming Private Debt: Unblocking and rebuilding the loan burdened real economy in Cyprus," Development Discussion Papers 2016-08, JDI Executive Programs.
    9. Erika Meins & Daniel Sager, 2013. "Sustainability and Risk: Towards a Risk-Based Sustainability Rating for Real Estate Investments," ERES eres2013_254, European Real Estate Society (ERES).
    10. Leslie G. Manison & Savvakis C. Savvides, 2016. "Towards Sustainable Growth: Rebuilding the Foundations of the Cyprus Economy," Development Discussion Papers 2016-07, JDI Executive Programs.
    11. 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.
    12. 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.
    13. Savvides, Savvakis C., 2000. "Market Analysis and Competitiveness in Project Appraisal," MPRA Paper 9796, University Library of Munich, Germany.

    More about this item

    Keywords

    Risk Analysis; Monte Carlo simulation; Investment appraisal; Project analysis; Forecasting and simulation; Business administration;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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