The Normal Distribution Formalization for Investment Economic Project Evaluation Using the Monte Carlo Method

Daria Bilenko, Ruslan Lavrov, Natalia Onyshchuk, Borys Poliakov and Yuliia Kabenok

Montenegrin Journal of Economics, 2019, vol. 15, issue 4, 161-171

Abstract: Investment plays a very important role in the economy, ensures its sustainable growth, contributes to the improvement of the living standards of the population. The most common mistake of planning investment projects is the insufficient development of risks that may affect the profitability of projects. The purpose of the paper is the formalizing the normal distribution for investment project evaluation using the Monte Carlo method. Such formalizing should allow to present normal distribution in a form that is understandable for nonspecialists in mathematical statistics. A user can easily calculate the standard deviation value and determine the limits of the confidence interval and the range of deviation from the mean value. Such mistakes can lead to incorrect investment decisions and significant losses. The desire to minimize risk requires developing a risk model. One of the risk assessment tools is the Monte Carlo method, which combines and develops both methods of sensitivity analysis and scenario analysis.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:mje:mjejnl:v:15:y:2019:i:4:161-171

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