Risk Modeling for Determining Value and Decision Making

By: Glenn R. Koller

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Hardcover | 17 May 2000 | Edition Number 1

At a Glance

Hardcover
336 Pages

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23.39 x 15.6 x 1.91

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Risk or uncertainty assessments are used as aids to decision making in nearly every aspect of business, education, and government. As a follow-up to the author's bestselling Risk Assessment and Decision Making in Business and Industry: A Practical Guide, Risk Modeling for Determining Value and Decision Making presents comprehensive examples of risk/uncertainty analyses from a broad range of applications. Decision/option selection Manufacturing Environmental assessment Pricing Identification of business drivers Production sharing Insurance Scheduling and optimization Investing Security Law Emphasizing value as the focus of risk assessment, this book offers discussions on how to make decisions using each risk model and what insights the model can provide. The presentation of each model also includes computer code that encapsulates its logic and direction on how to apply the model to other types of problems. The author devotes a chapter to techniques for consistently collecting data in an inconsistent world and offers another chapter on how to reflect the effect of "soft" issues in the value of an opportunity. The book's final chapters delineate the techniques and technologies used to perform risk/uncertainty analyses, including sections on distribution, Monte Carlo process, dependence, sensitivity analysis, time series analysis, and chance of failure. Visit RiskSupport.com for more information!

Industry Reviews

"This book makes for some interesting reading and is notable for addressing important nontechnical issues related to modeling riskit provides insight into the way in which some nontechnical people think, thus offering a potential for better communication with business-oriented clients." - Technometrics, May 2001 "This book is based on the original work of the author, who is a well-known specialist in the field of decision and risk analysis. The narration of the issues of concern referring to making decisions is excellent and gives the proper atmosphere of a proper discussion to address decisions of large investments or important topics. the overall practical experience of the author adds value The book is important. It brings to the potential reader a challenging way of looking into the decision-making process by using direct approaches The advantage of the book is that it addresses the decision -making process in a direct and simple manner, following patterns given by the author in the contributing-factor diagram I f one is serious about using the knowledge of decision analysis in one's practical, everyday work, this book is worth the pricethis book is worth reading and, to the extent possible, integrating in various tasks for solving decision problems facing a corporation or a person." -JASA, September 2001 "An instructor should consider this book for class use, because it gives a direct approach to the decision-making process, uncertainty, and risk estimation and how to interpret such knowledge in assessing and determining the values of potential alternatives, which are not always explicitly expressed by managers, stakeholders, or decision makers." -JASA, September 2001

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You Can Find This Book In

Non-Fiction Business & Management Management & Management Techniques Management Decision Making Accounting & Finance Accounting Economics Econometrics Economic Statistics Mathematics Probability & Statistics Applied Mathematics

Mathematical Modelling

Introduction	p. 1
Scope	p. 1
Realism	p. 2
Models, Validation, and Precision	p. 3
Value	p. 4
Examples
Two Approaches to Solving Decision Trees--A Class-Action-Suit Example	p. 7
Introduction	p. 7
Building the Decision Tree	p. 9
What Is the Question?	p. 14
Interpretation of the Probabilistic-Branching Model	p. 19
So, So What?	p. 20
Terrorism Risk Models--Relative and Absolute Risk	p. 21
Terrorism Relative-Risk Model	p. 21
What Is the Question?	p. 22
Building the Contributing-Factor Diagram for the Relative-Ranking Terrorist-Threat Risk Model	p. 23
Category Weights	p. 27
Relative-Risk Model Equations	p. 28
Relative-Risk Model Applied to Terrorist Organization #1	p. 29
Relative-Risk Model Results from Evaluation of Terrorist Organization #1	p. 37
Relative-Risk Model Applied to Terrorist Organization #2	p. 39
Relative-Risk Model Results from Evaluation of Terrorist Organization #2	p. 48
Comparison of the Two Terrorist Organizations	p. 49
Building the Terrorism Absolute-Cost Risk Model	p. 53
Absolute-Cost Risk Model Equations	p. 55
Application of the Absolute-Cost Risk Model to Terrorist Organization #2	p. 55
Absolute-Cost Risk Model Results for Evaluation of Terrorist Organization #2	p. 61
So, So What?	p. 62
Gathering Information Consistently in an Inconsistent World	p. 67
Introduction	p. 67
The Problem	p. 70
The Solution	p. 72
So, So What?	p. 75
New Manufacturing Facility--Business-Justification Model	p. 79
Introduction	p. 79
What Is the Question?	p. 79
Construction of the Contributing-Factor Diagram	p. 82
Populating the Model with Data	p. 84
Risk Model Equations	p. 92
Results from Model Execution	p. 94
So, So What?	p. 95
Oil-Field-Development Investment--Opportunity Risk Model	p. 101
Introduction	p. 101
What Is the Question?	p. 102
Categories and Variables	p. 103
Field-Development Risk Model Equations	p. 104
Populating the Model with Data	p. 107
Results from Model Execution	p. 113
So, So What?	p. 117
Using Chance of Failure and Risk-Weighted Values to Reflect the Effect of "Soft" Issues on the Value of an Opportunity	p. 119
Introduction	p. 119
Accurate Estimates of Value Are Essential	p. 121
Types of Chance of Failure	p. 121
How to Express and Use Chance of Failure	p. 124
Risk-Weighted Values and the Value of a Portfolio Element	p. 128
Value of a Portfolio Composed of Dissimilar Elements	p. 131
So, So What?	p. 134
Production-Sharing Agreement Risk Model	p. 135
Introduction	p. 135
What Is the Question?	p. 135
Building the Contributing-Factor Diagrams	p. 137
Risk-Model Equations	p. 139
Populating the Model with Technical Data	p. 146
Chances of Abject Failure	p. 147
Populating the Model with Financial Data	p. 148
Results from the Model	p. 152
So, So What?	p. 158
Scheduling and Optimization Risk Model	p. 163
Introduction	p. 163
The Problem	p. 164
Design of the Model and the Contributing-Factor Diagram	p. 166
The Risk-Model Code	p. 169
Results from Model Execution	p. 171
So, So What?	p. 175
Decision/Option-Selection Risk Model	p. 179
Introduction	p. 179
The Current Situation	p. 180
The Problem	p. 182
Results from Model Execution	p. 185
So, So What?	p. 191
Risk Process to Identify Business Drivers, Maximize Value, and Determine the Value of Potential Expenditures	p. 193
Introduction	p. 193
The Problem	p. 194
The Risk/Uncertainty Model	p. 195
Populating the Model with Data	p. 196
Results from Model Execution	p. 199
Determining Business Drivers and Maximizing Value	p. 201
Determining the Value of Potential Expenditures	p. 206
So, So What?	p. 206
Summary	p. 209
Other Applications	p. 209
Insurance Example	p. 209
Pricing Example	p. 210
Environmental Applications	p. 211
Legal Applications	p. 211
Security Applications	p. 212
It Is Mostly the Process--Not the Technology	p. 213
Accomplishment of Vision Generates Real Returns	p. 215
Exploration Example	p. 215
Maintenance/Construction Example	p. 216
Fundamentals of Risk Assessment
Building a Consensus Model	p. 221
What Is the Question?--Most of the Time and Effort	p. 221
Consensus Model	p. 222
Group Dynamics	p. 223
Write It Down	p. 224
Sort It Out	p. 225
Group Dynamics Again	p. 226
Units	p. 227
Overarching Categories	p. 228
Build a Contributing-Factor Diagram	p. 229
The Contributing-Factor Diagram--Getting Started	p. 229
Identify and Define Variables	p. 233
Ask the Right Question	p. 234
Double Dipping	p. 235
Double Dipping and Counting the Chickens	p. 236
Fixing the Double Dipping and Counting-the-Chickens Problem	p. 236
CFD-Building Example	p. 237
Short List of Hints for Building a CFD	p. 241
Monte Carlo Analysis	p. 243
A Bit of History	p. 243
For What Is It Good?	p. 244
Simple Monte Carlo Example	p. 244
How Many Random Comparisons Are Enough?	p. 245
Output from Monte Carlo Analysis--The Frequency and Cumulative Frequency Plots	p. 246
Interpreting Cumulative Frequency Plots	p. 247
Combining Monte Carlo Output Curves	p. 253
Decisions and Distributions	p. 255
Decisions	p. 255
Just What Is a Distribution?	p. 255
Distributions--How to Approach Them	p. 260
Symmetrical Distributions	p. 261
Skewed Distributions	p. 262
Spiked Distributions	p. 263
Flat Distributions	p. 265
Truncated Distributions	p. 266
Discrete Distributions	p. 266
Bimodal Distributions	p. 268
Reading Data from a File	p. 270
Peakedness	p. 271
Specific Distribution Types	p. 273
Chance of Failure	p. 275
Chance of Failure--What Is It?	p. 275
Failure of a Risk Component	p. 276
Chance of Failure That Does Not Affect an Input Distribution	p. 277
Incorporating Chance of Failure in a Plot of Cumulative Frequency	p. 278
Another Reason for Chance of Failure	p. 280
The "Inserting 0s Work Around"	p. 282
COF and Multiple Output Variables	p. 284
Time-Series Analysis and Dependence	p. 285
Introduction to Time-Series Analysis and Dependence	p. 285
Time-Series Analysis--Why?	p. 285
Time-Series Analysis--How?	p. 286
Time-Series Analysis--Results	p. 287
Some Things To Consider	p. 288
Dependence--What Is It?	p. 290
Independent and Dependent Variables	p. 291
Degree of Dependence	p. 291
Multiple Dependencies and Circular Dependence	p. 294
Effect of Dependence on Monte Carlo Output	p. 295
Dependence--It's Ubiquitous	p. 295
Risk-Weighted Values and Sensitivity Analysis	p. 299
Introduction to Risk-Weighted Values and Sensitivity Analysis	p. 299
Risk-Weighted Values--Why?	p. 299
Risk-Weighted Values--How?	p. 301
The Net Risk-Weighted Value	p. 303
The Economic Risk-Weighted Resource Value	p. 304
Risk-Weighted Values--The Answer	p. 305
Sensitivity Analysis--Why?	p. 306
Sensitivity Analysis--How?	p. 308
Sensitivity Analysis--Results	p. 311
Selected Readings	p. 313
Index	p. 317
Table of Contents provided by Syndetics. All Rights Reserved.

Risk Modeling for Determining Value and Decision Making

At a Glance

Hardcover

Industry Reviews

Shipping

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