Simulation Decomposition: New Approach For Better Simulation Analysis Of Multi-Variable Investment Projects
Kozlova, Mariia; Collan, Mikael; Luukka, Pasi (2017)
Fuzzy Economic Review
School of Business and Management
investments that contain multi-variable uncertainty. The method is called “simulation
decomposition”. Typically the result of simulation-based investment analysis is in the form
of histogram distributions - here we propose a method for first classifying the possible
outcomes of selected uncertain variables into states and then using combinations of the
created states in the decomposition of the simulated distribution into a number of subdistributions.
The sub-distributions that can be matched to state-combinations of the
variables contain relevant actionable information that helps managers in decision-making
with regards to the studied investments.
A numerical illustration of a renewable energy investment is used to demonstrate the
usability, the enhanced analytical power, and the intuitively understandable benefits that
can be reached by using the simulation decomposition method. The proposed method is
generally usable and can be utilized independent of the investment context.
Kozlova, M., Collan, M., Luukka, P. (2017). Simulation Decomposition: New Approach For Better Simulation Analysis Of Multi-Variable Investment Projects. Fuzzy Economic Review, Vol 21, Issue 2. p.3-18.
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