Rational Choice of the Investment Project Using Interval Estimates of the Initial Parameters

Kotsyuba Oleksiy S. ()
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Kotsyuba Oleksiy S.: Kyiv National Economic University named after V. Hetman

The Problems of Economy, 2016, issue 4, 254_260

Abstract: The article is dedicated to the development of instruments to support decision-making on the problem of choosing the best investment project in a situation when initial quantitative parameters of the considered investment alternatives are described by interval estimates. In terms of managing the risk caused by interval uncertainty of the initial data, the study is limited to the component (aspect) of risk measure as a degree of possibility of discrepancy between the resulting economic indicator (criterion) and its normative level (the norm). An important hypothesis used as a basis for the proposed in the work formalization of the problem under consideration is the presence – for some or all of the projects from which the choice is made – of risk of poor rate of return in terms of net present (current) value. Based upon relevant developments within the framework of the fuzzy-set methodology and interval analysis, there formulated a model for choosing an optimal investment project from the set of alternative options for the interval formulation of the problem. In this case it is assumed that indicators of economic attractiveness (performance) of the compared directions of real investment are described either by interval estimates or possibility distribution functions. With the help of the estimated conditional example there implemented an approbation of the proposed model, which demonstrated its practical viability.

Keywords: investment project; interval uncertainty; interval analysis; risk of poor rate of return; function of possibility distribution (search for similar items in EconPapers)
Date: 2016
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