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Entropy
Volume 22
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10.3390/e22010047
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Article

Combined Stochastic Process and Value at Risk: A Real-World Information System Decision Case

by
Liang-Chuan Wu
1,
Liang-Hong Wu
2,* and
Fan-Yun Pai
3,*
1
Institute of Technology Management, National Chung Hsing University, 250 Kuo Kuang Rd., Taichung 402, Taiwan
2
Business School, University of Shanghai for Science and Technology, Shanghai 200093, China
3
Department of Business Administration, National Changhua University of Education, Changhua 50007, Taiwan
*
Authors to whom correspondence should be addressed.
Entropy 2020, 22(1), 47; https://doi.org/10.3390/e22010047
Submission received: 16 November 2019 / Revised: 19 December 2019 / Accepted: 26 December 2019 / Published: 30 December 2019
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Abstract

In this study, we used a combined stochastic process and value-at-risk (VaR) method to examine an electronic commerce expansion decision. By modeling uncertain benefits as a stochastic process, maximum losses of alternative decisions were quantified and compared to help managers to make information system/information technology (IS/IT) project decisions. Our results, based on the maximum loss perspective, demonstrated that uncertainty plays a critical role in evaluating IS/IT projects. More importantly, the results illustrate that VaR serves as a useful tool in decision-making for managers to quantify the value of maximum possible loss and to help them reach decisions.
Keywords: information system; stochastic process; uncertainty; value at risk (VaR) information system; stochastic process; uncertainty; value at risk (VaR)

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MDPI and ACS Style

Wu, L.-C.; Wu, L.-H.; Pai, F.-Y. Combined Stochastic Process and Value at Risk: A Real-World Information System Decision Case. Entropy 2020, 22, 47. https://doi.org/10.3390/e22010047

AMA Style

Wu L-C, Wu L-H, Pai F-Y. Combined Stochastic Process and Value at Risk: A Real-World Information System Decision Case. Entropy. 2020; 22(1):47. https://doi.org/10.3390/e22010047

Chicago/Turabian Style

Wu, Liang-Chuan, Liang-Hong Wu, and Fan-Yun Pai. 2020. "Combined Stochastic Process and Value at Risk: A Real-World Information System Decision Case" Entropy 22, no. 1: 47. https://doi.org/10.3390/e22010047

APA Style

Wu, L.-C., Wu, L.-H., & Pai, F.-Y. (2020). Combined Stochastic Process and Value at Risk: A Real-World Information System Decision Case. Entropy, 22(1), 47. https://doi.org/10.3390/e22010047

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