We tend to make the assumption that when considering an investment opportunity, executives seek to fully understand its financial attractiveness. Likewise, we expect that politicians would be interested in some quantitative measure of the impact of an intended policy. However it is more common for decision makers to rely on an overly simple single Continue reading ‘Just give me the number’
Category Archives: Probabilistic Analysis
Understanding project risk using DeltaLogN
The best approach for taking into account risks when economically evaluating investment opportunities is the application of probabilistic valuation. This is a more disciplined methodology than just ‘running some sensitivities’. Continue reading Understanding project risk using DeltaLogN
An innovation for decision tree probabilities
The attraction of a decision tree is that it brings together conceptual thinking about a decision problem and the quantitative evaluation of it. For the latter purpose it may be inferior to other methodologies, for example Monte Carlo simulation or analytical Continue reading An innovation for decision tree probabilities
Scenarios, numbers and the lognormal
However interesting and generally appealing scenario thinking, as discussed in my previous article, may be, it only provides a broad, qualitative picture of the context within which one is considering a significant investment decision. But indeed, a very important Continue reading Scenarios, numbers and the lognormal