Risk, Optimisation, and Quantitative Finance

Challenges in Risk Identification

This is a follow-on article to the one “Key Stages in Modelling Risk and Uncertainty” and focusses on some of the challenges in the risk identification stage. Risk identification involves identifying which factors of a real-lie situation affect the outcome (whose risk we are trying to assess, such as the value of a contract, the …

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Key Stages in Modelling Risk and Uncertainty

The modelling of risk and uncertainty should involve several stages. These are summarised in this note. It is important to note that each stage is important, and if not performed adequately, the quality of the results, conclusions and decisions could be severely affected to the point that the analysis is wrong, very inaccurate or misleading. …

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Maximising Project Value Through Phasing and Real Options Approaches

Projects can often be divided into phases. As well as to help set targets, milestones and plan resources, the phasing of projects is very useful if there are critical points at which a project may fail, or its direction should be adapted or modified in some way. The modularisation of projects into sub-projects (modules), allows …

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Real Options: Simple Example

The term “Real Option” refers to an additional decision possibility that is created in any real-life situation if the scope of the permitted decision alternatives is extended in some way. Real options are most frequently discussed in the context of situations in which there is uncertainty. However, there is no requirement for uncertainty to be …

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