Risk, Uncertainty and Decision-Making in Property

Book Cover......Page 1
Title......Page 5
Copyright......Page 6
Dedication......Page 7
Contents......Page 8
Preface......Page 10
Preface to the first edition......Page 11
1.1  INTRODUCTION......Page 12
1.2  THE PROCESS OF PROPERTY DEVELOPMENT......Page 13
Acquisition, production and disposal......Page 14
Attitudes to risk......Page 16
Uncertainty and risk......Page 18
1.3  DEVELOPMENT APPRAISAL......Page 19
(b) Ancillary costs......Page 20
(d) Short-term rate of interest......Page 21
(h) Building period......Page 22
(m) Investment yield......Page 23
Sources of data......Page 25
Sensitivity and uncertainty......Page 26
The formal approach......Page 28
Kinds of decision......Page 30
Models......Page 31
The Pay-off table......Page 32
A rational approach?......Page 33
The Hurwicz approach......Page 34
Regret......Page 35
3.1  INTRODUCTION......Page 38
The language of probability......Page 39
How probabilities can be assessed......Page 40
The concept of expectation......Page 45
Decision trees......Page 48
The concept of utility......Page 50
Types and characteristics of utility functions......Page 51
Simulation, models and sensitivity analysis......Page 57
Models and sensitivity analysis......Page 58
The Monte Carlo method......Page 59
NOTES......Page 61
4.1  INTRODUCTION......Page 62
The use of subjective probabilities......Page 63
4.3  PROBABILITY DISTRIBUTIONS AND TIME......Page 68
Evaluating uncertain cash flows over time......Page 70
4.4  INFORMED APPROACHES TO DEVELOPMENT APPRAISAL......Page 74
Scenarios......Page 76
4.5  CONCLUSION......Page 81
5.1  INTRODUCTION......Page 83
5.2  CASE STUDY: GENERAL DISCUSSION......Page 84
Sensitivity analysis......Page 87
Identification of probabilistic variables......Page 88
Probability distributions......Page 89
Some general comments......Page 90
Two state variables: an initial analysis......Page 91
Repetition, stability and variability: testing the model......Page 94
Interpreting the model’s performance......Page 96
Measures of central tendency: the average performance of the model......Page 97
Sensitivity analysis in simulation......Page 98
Three state variables......Page 102
Changing the shape of a distribution......Page 103
5.4  CASE STUDY CONCLUSIONS......Page 105
6.1  INTRODUCTION......Page 107
6.2  USING @RISK......Page 108
6.3  @RISK OUTPUT......Page 112
6.4  MODELLING THE INTERDEPENDENCE BETWEEN STATE VARIABLES......Page 114
6.5  CONTINUOUS PROBABILITY DISTRIBUTIONS FOR STATE VARIABLES......Page 117
The normal distribution......Page 118
The triangular distribution......Page 121
The beta distribution......Page 123
6.6  SIMULATION IN THE DEVELOPMENT APPRAISAL PROCESS......Page 126
NOTES......Page 127
Postscript......Page 128
Appendix: The characteristics of the normal distribution......Page 131
PROBABILITY AND THE NORMAL DISTRIBUTION......Page 132
Bibliography......Page 136
Index......Page 140