Cost-Benefit Analysis and Risk in Socioeconomic Evaluation of Projects
Cost-Benefit analýza a riziko v socioekonomickém hodnocení projektů

Summary/Abstract: The paper focuses on frequently omitted mathematical and statistical intricacies related to risk quantification in the process of measuring the value of public projects and policies especially within the most prevalent context of cost-benefit analysis (CBA). First it deals with the appropriateness of inputs into cost-benefit analysis usually expressed in terms of expected values rather than option prices. After the discussion of theoretical findings and practical relevance it hastens to conclude that expected values are well-acceptable if all limited restrictions are properly taken into any considerations. Then it shows the practical problems in quantifying expected values of net social benefits based just upon point estimates and suggests applying Monte Carlo simulation to derive them instead.

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