Application of Duration Measure in Quantifying the Sensitivity of Project Returns to Changes in Discount Rates

Vahidreza Yousefi, Siamak Haji Yakhchali and Jolanta Tamošaitienė
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Vahidreza Yousefi: University of Tehran, 1417466191 Tehran, Iran
Siamak Haji Yakhchali: University of Tehran, 1417466191 Tehran, Iran
Jolanta Tamošaitienė: Faculty of Civil Engineering, Vilnius Gediminas Technical University, Saulėtekio al. 11, LT-10223 Vilnius, Lithuania

Administrative Sciences, 2019, vol. 9, issue 1, 1-14

Abstract: In this research, the concept of Duration with a new application in project management has been defined. The Duration of each project provides the project manager with a combined measure containing concepts of return, cost and time of the project. Further in this article, the changes in project return, based on different assumptions such as discount rate, have been examined. To examine the effect of the changes in these factors, the Monte Carlo simulation has been used. The relationship between these factors is nonlinear which reflects the great importance of investment on appropriate risk management systems. The data from a set of construction projects have been used in order to verify the results of this study. Similar relationships can be expected to exist in other industries as well.

Keywords: project duration; convexity; discount rate risk; reinvestment risk; risk measures; monte carlo simulation (search for similar items in EconPapers)
JEL-codes: L M M0 M1 M10 M11 M12 M14 M15 M16 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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