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Adm. Sci. 2019, 9(1), 13; https://doi.org/10.3390/admsci9010013

Application of Duration Measure in Quantifying the Sensitivity of Project Returns to Changes in Discount Rates

1
University of Tehran, 1417466191 Tehran, Iran
2
Faculty of Civil Engineering, Vilnius Gediminas Technical University, Saulėtekio al. 11, LT-10223 Vilnius, Lithuania
*
Authors to whom correspondence should be addressed.
These authors contributed equally to this work.
Received: 10 December 2018 / Revised: 25 January 2019 / Accepted: 28 January 2019 / Published: 1 February 2019
(This article belongs to the Special Issue Rational Decision Making in Risk Management)
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Abstract

In this research, the concept of Duration with a new application in project management has been defined. The Duration of each project provides the project manager with a combined measure containing concepts of return, cost and time of the project. Further in this article, the changes in project return, based on different assumptions such as discount rate, have been examined. To examine the effect of the changes in these factors, the Monte Carlo simulation has been used. The relationship between these factors is nonlinear which reflects the great importance of investment on appropriate risk management systems. The data from a set of construction projects have been used in order to verify the results of this study. Similar relationships can be expected to exist in other industries as well. View Full-Text
Keywords: project duration; convexity; discount rate risk; reinvestment risk; risk measures; monte carlo simulation project duration; convexity; discount rate risk; reinvestment risk; risk measures; monte carlo simulation
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Yousefi, V.; Yakhchali, S.H.; Tamošaitienė, J. Application of Duration Measure in Quantifying the Sensitivity of Project Returns to Changes in Discount Rates. Adm. Sci. 2019, 9, 13.

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