Decision Trees A Primer for Decision-making Professionals By Rafael Olivas 2007 Decision Trees A Primer for Decision-making Professionals ii Decision Trees A Primer for Decision-making Professionals Table of Contents Section Page Preface................................................................................................................................. iv 1.0 Introduction................................................................................................
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ASW/QMB-Ch.04 3/8/01 10:35 AM Page 96 Chapter 4 DECISION ANALYSIS CONTENTS 4.1 PROBLEM FORMULATION Influence Diagrams Payoff Tables Decision Trees DECISION MAKING WITHOUT PROBABILITIES Optimistic Approach Conservative Approach Minimax Regret Approach DECISION MAKING WITH PROBABILITIES Expected Value of Perfect Information RISK ANALYSIS AND SENSITIVITY ANALYSIS Risk Analysis Sensitivity Analysis DECISION ANALYSIS WITH SAMPLE INFORMATION An Influence Diagram A Decision Tree Decision Strategy
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improve management decisions‚ thereby enabling you to: 1. Learn about decision making under certainty‚ under uncertainty‚ and under risk. 2. Learn several strategies for decision-making under uncertainty‚ including expected payoff‚ expected opportunity loss‚ maximin‚ maximax‚ and minimax regret. 3. Learn how to construct and analyze decision trees. 4. Understand aspects of utility theory. 5. Learn how to revise probabilities with sample
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Presentation Summary Chapter 9 -‐ An analysis of conflict 9.1 & 9.2 Understanding game theory Game theory: Attempts to model and predict the outcome between rational individuals. -‐Helps us understand how managers‚ investors and other affected parties can rationally deal with the economic consequences
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strikes ensure that the risk is capped on both sides‚ and this is a much more conservative strategy which would protect an investor against unlimited losses. Losses are limited to the premium paid to initiate the trade. 2. Deduce the payoff table The payoff table can be explained using the following example; Zimplow shares are currently trading at $4500. An investor expects low volatility in the zimplow share and expects the market to remain range bound. The investor buys 1 ITM Zimplow Call
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) 3. Ethnicity African ( ) Amerindian ( ) European ( ) Portuguese ( ) East-Indian ( ) Mixed ( ) 4. What type of market structure exists in the telecommunications industry? Monopolistic ( ) Perfect Competition ( ) Monopoly ( ) Duopoly ( ) 5. What are the characteristics of the market structure of the telecommunications industry? Two firms ( ) Barriers to entry and exit ( ) Homogeneous and defrenciated products ( ) All of the above ( ) 6. What are the two existing
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MKT B370 (Specimen) SUGGESTED SOLUTION SECTION A Question 1 (a) Students are expected to provide a short discussion including the following content. If too little inventory is maintained‚ there is a risk of stockout and potential lost sales. In addition‚ if there is not sufficient work-in process inventory‚ the production process may become too inefficient‚ raising the cost of production. On the other hand‚ if too much inventory is maintained‚ the carrying cost may become excessively
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state space tableau of payoffs on the primitive assets. We assume that there are a finite number of states of nature and that each security has its payoffs written explicitly as a function of the realized state of nature. We index states by s = 1‚ 2‚ …‚ S (not a problem for S = but intuition can be lost as we look at this for the first time) and assets by i = 1‚ 2‚ …‚ N. The 2-date investment problem can be characterized by the tableau of per share dollar payoffs on the N assets in each
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............................................................ 8 PRICING............................................................................................................................................................... 8 PRICE‚ GREEKS‚ PAYOFF DISTRIBUTION ............................................................................................................. 8 SENSITIVITY ANALYSIS ....................................................................................................
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Purdue University Leyla Ozsen IE 383 Fall 2005 DECISION ANALYSIS Making important decisions often requires treating major uncertainty‚ long time horizons‚ and complex value issues. To deal with such problems‚ the discipline of decision analysis was developed. The discipline comprises the philosophy‚ theory‚ methodology‚ and professional practice necessary to formalize the analysis of important decisions. Decision Analysis is a set of quantitative decision-making techniques for decision situations
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