Deterministic versus Stochastic Sensitivity Analysis in Investment Problems

An Environmental Case Study

W.J.H. van Groenendaal, J.P.C. Kleijnen

Research output: Working paperDiscussion paperOther research output

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Abstract

Sensitivity analysis in investment problems is an important tool to determine which factors can jeopardize the future of the investment.Information on the probability distribution of those factors that affect the investment is mostly lacking.In those situations the analysts have two options: (i) apply a method that does not require knowledge of that distribution, or (ii) make assumptions about the distribution.In both approaches sensitivity analysis should result in practical information about the actual importance of potential factors.For approach (i) we apply statistical design of experiments (DOE) in combination with regression analysis or meta-modeling.For approach (ii) we investigate five types of relationships between the model output and each individual factor; Pearson's p, Spearman's rank correlation, and location, dispersion, and statistical dependence.We introduce two distribution types popular with practitioners: uniform and triangular.In an environmental case study both approaches identify the same factors as important.
Original languageEnglish
Place of PublicationTilburg
PublisherOperations research
Number of pages27
Volume2001-46
Publication statusPublished - 2001

Publication series

NameCentER Discussion Paper
Volume2001-46

Fingerprint

Sensitivity analysis
Factors
Individual factors
Analysts
Probability distribution
Regression analysis
Rank correlation
Metamodeling
Design of experiments

Keywords

  • sensitivity analysis
  • experimental design
  • investment analysis
  • simulation

Cite this

van Groenendaal, W. J. H., & Kleijnen, J. P. C. (2001). Deterministic versus Stochastic Sensitivity Analysis in Investment Problems: An Environmental Case Study. (CentER Discussion Paper; Vol. 2001-46). Tilburg: Operations research.
van Groenendaal, W.J.H. ; Kleijnen, J.P.C. / Deterministic versus Stochastic Sensitivity Analysis in Investment Problems : An Environmental Case Study. Tilburg : Operations research, 2001. (CentER Discussion Paper).
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van Groenendaal, WJH & Kleijnen, JPC 2001 'Deterministic versus Stochastic Sensitivity Analysis in Investment Problems: An Environmental Case Study' CentER Discussion Paper, vol. 2001-46, Operations research, Tilburg.

Deterministic versus Stochastic Sensitivity Analysis in Investment Problems : An Environmental Case Study. / van Groenendaal, W.J.H.; Kleijnen, J.P.C.

Tilburg : Operations research, 2001. (CentER Discussion Paper; Vol. 2001-46).

Research output: Working paperDiscussion paperOther research output

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T1 - Deterministic versus Stochastic Sensitivity Analysis in Investment Problems

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AB - Sensitivity analysis in investment problems is an important tool to determine which factors can jeopardize the future of the investment.Information on the probability distribution of those factors that affect the investment is mostly lacking.In those situations the analysts have two options: (i) apply a method that does not require knowledge of that distribution, or (ii) make assumptions about the distribution.In both approaches sensitivity analysis should result in practical information about the actual importance of potential factors.For approach (i) we apply statistical design of experiments (DOE) in combination with regression analysis or meta-modeling.For approach (ii) we investigate five types of relationships between the model output and each individual factor; Pearson's p, Spearman's rank correlation, and location, dispersion, and statistical dependence.We introduce two distribution types popular with practitioners: uniform and triangular.In an environmental case study both approaches identify the same factors as important.

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van Groenendaal WJH, Kleijnen JPC. Deterministic versus Stochastic Sensitivity Analysis in Investment Problems: An Environmental Case Study. Tilburg: Operations research. 2001. (CentER Discussion Paper).