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Risk Analysis in Investment Appraisal
Savvakis C. Savvides Cyprus Development Bank - Project Financing Division Project Appraisal Journal, Vol. 9, No. 1, March 1994 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.
Keywords: Risk Analysis, Monte Carlo simulation, Investment appraisal, Project analysis, Forecasting and simulation, Business administration JEL Classifications: D81, O22, G31, F47, M10 Accepted Paper SeriesDate posted: April 24, 2001 ; Last revised: August 15, 2008Suggested CitationContact Information
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