Title

Elasticity as a Measure of Project Uncertainty

Publication Title

Research in Finance

Publication Date

2011

Document Type

Article

Keywords

elasticity, project uncertainty

Disciplines

Finance and Financial Management

Abstract

We develop an indicator of project uncertainty via the sensitivity of the IRR to any assumption regarding which performance scenario for the project is most relevant. The most relevant scenario represents the performance (into the future) that we should project (as compared to any we actually project). Our indicator is a measure one can regard as a form of absolute value of elasticity that we define as the ratio of an expected absolute value change in IRR, over differing scenarios, to a location parameter.

Publisher

Emerald Group Publishing Limited

Publisher Location

United Kingdom


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