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Mathematical Modelling Of Decision-Making Application To Investment

Author

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  • Atefeh Hasan-Zadeh

    (Fouman Faculty of Engineering, College of Engineering, University of Tehran, Iran)

Abstract

In this paper, the mathematical modelling of decision-making problems based on probabilistic graphical models is presented. The models, in addition to random variables, also include decision and profit variables. The proposed decision models contain one or more decisions and their purpose is to assist the decision maker in choosing the best decision under conditions of uncertainty. The techniques used include modelling and evaluating decision trees, as well as evaluating, modelling and presenting the algorithm of influence diagrams (as the expansion of the Bayesian networks) to show the communication structure of the problem and thus provide a coherent presentation with an effective evaluation. The limited memory influence diagram and dynamic decision networks (as a dynamic Bayesian network) have also been developed to avoid the limitations of the influence diagram limitation. An application of the exposed models is presented in investment decision-making.

Suggested Citation

  • Atefeh Hasan-Zadeh, 2019. "Mathematical Modelling Of Decision-Making Application To Investment," Advances in Decision Sciences, Asia University, Taiwan, vol. 23(2), pages 1-14, June.
    • Handle: RePEc:aag:wpaper:v:23:y:2019:i:2:p:1-14
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    References listed on IDEAS

    as
    1. Steffen L. Lauritzen & Dennis Nilsson, 2001. "Representing and Solving Decision Problems with Limited Information," Management Science, INFORMS, vol. 47(9), pages 1235-1251, September.
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    More about this item

    Keywords

    Decision models; Decision tree; Influence diagram; Bayesian network; Investment decision-making;
    All these keywords.

    JEL classification:

    • B16 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Quantitative and Mathematical
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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