Session 8: Decision-making under uncertainty Flashcards
1
Q
Greater revenue in outcomes naturally leads to…
A
Greater risk
2
Q
What is expected value?
A
Weighted average outcome of several possible outcomes
3
Q
What are real options?
A
Right (but not obligation) to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a capital investment project
4
Q
What does the risk aversion graph look like?
A
Curved graph with origin at 0. Utility on y axis, income on x axis. Risks are represented as straight lines between points
