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    Topic No. VII-Decision Admitting Uncertainty

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    Mc John Poblete
    Sensitivity analysis is used to analyze how dependent variables change with independent variables. There are two approaches: local sensitivity analysis looks at derivatives at a single point, while global sensitivity analysis uses sampling to explore the design space. Decision analysis identifies alternatives and assesses them using models like decision trees, which show outcomes and likelihoods of alternatives. Decision trees can help decision makers understand how sensitive optimal solutions are to changes in parameter values.

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    Topic No. VII-Decision Admitting Uncertainty

    Uploaded by

    Mc John Poblete
    375 views18 pages
    Sensitivity analysis is used to analyze how dependent variables change with independent variables. There are two approaches: local sensitivity analysis looks at derivatives at a single point, while global sensitivity analysis uses sampling to explore the design space. Decision analysis identifies alternatives and assesses them using models like decision trees, which show outcomes and likelihoods of alternatives. Decision trees can help decision makers understand how sensitive optimal solutions are to changes in parameter values.

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    Topic no. VII-Decision Admitting Uncertainty

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    Sensitivity analysis is used to analyze how dependent variables change with independent variables. There are two approaches: local sensitivity analysis looks at derivatives at a single point, while global sensitivity analysis uses sampling to explore the design space. Decision analysis identifies alternatives and assesses them using models like decision trees, which show outcomes and likelihoods of alternatives. Decision trees can help decision makers understand how sensitive optimal solutions are to changes in parameter values.

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    375 views18 pages

    Topic No. VII-Decision Admitting Uncertainty

    Uploaded by

    Mc John Poblete
    Sensitivity analysis is used to analyze how dependent variables change with independent variables. There are two approaches: local sensitivity analysis looks at derivatives at a single point, while global sensitivity analysis uses sampling to explore the design space. Decision analysis identifies alternatives and assesses them using models like decision trees, which show outcomes and likelihoods of alternatives. Decision trees can help decision makers understand how sensitive optimal solutions are to changes in parameter values.

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    TOPIC # 7

    Decision Admitting Uncertainty

    Ables, Rhod Peter P.


    Diones, Mark Joseph C.
    Dura, Edzel Loyd B.
    Umbao, Jamicah Cake A.
    BSEE 102D
    Outline

    ❖ Sensitivity Analysis
    ❖ Two approaches in analyzing Sensitivity
    Analysis
    ❖ Decision Analysis Model
    ❖ Decision Tree
    LEARNING OBJECTIVES

    I. To define the sensitivity and decision analysis


    II. To determine the two approaches of the
    sensitivity analysis
    III. To understand how the decision tree works
    DISCUSSION

    Sensitivity Analysis
    Sensitivity Analysis is a tool used in financial modelling
    to analyze how the different values of a set of independent
    variables affect a specific dependent variable under certain
    specific conditions. In general, sensitivity analysis is used in
    a wide range of fields, ranging from biology and geography to
    economics and engineering.
    DISCUSSION

    Sensitivity Analysis

    The process of estimating how target


    variables change in relation to changes in
    input variables.
    DISCUSSION

    Two approaches in analyzing


    Sensitivity Analysis

    • Local sensitivity analysis


    • Global sensitivity analysis
    DISCUSSION

    Two approaches in analyzing


    Sensitivity Analysis
    Local sensitivity analysis is derivative based (numerical or
    analytical). The term local indicates that the derivatives are taken
    at a single point. This method is appropriate for simple cost
    functions, but not feasible for complex models, like models with
    discontinuities do not always have derivatives.
    DISCUSSION

    Two approaches in analyzing


    Sensitivity Analysis

    Global sensitivity analysis is the second approach


    to sensitivity analysis. This approach uses a global
    set of samples to explore the design space.
    DISCUSSION

    Decision Analysis Models


    Decision Analysis is a form of decision-making that involves
    identifying and assessing all aspects of a decision, and
    taking actions based on the decision that produces the most
    favorable outcome.
    DISCUSSION

    The Decision Analysis Process

    • Identify the decision situation and understand


    objectives
    • Identify alternatives
    • Decompose and model the problem
    -model of problem structure
    -model of uncertainty
    -model of preferences
    DISCUSSION

    The Decision Analysis Process

    • Choose the best alternative


    • Implement the chosen alternative
    DISCUSSION

    Decision Analysis Models

    Decision Tree is a support tool with a tree-like structure


    that models probable outcomes, cost of resources,
    utilities, and possible consequences. Decision trees
    provide a way to present algorithms with conditional
    control statements. They include branches that represent
    decision-making steps that can lead to a favorable result.
    DISCUSSION

    DECISION TREE
    DISCUSSION

    DECISION TREE
    CONCLUSION

    One method that helps decision makers


    with more than simply finding a solution to a
    problem is sensitivity analysis. It offers
    pertinent insight into the issues related to
    the model being referenced. The decision-
    maker gains a good understanding of how
    responsive his optimal solution is to any
    adjustments in the input values of one or
    more parameters.
    CONCLUSION

    The process of decision analysis is


    examining each component of a choice,
    making decisions based on those that result
    in the best outcomes, and act accordingly.
    Models are employed in decision analysis to
    assess the favorability of alternative
    outcomes. Models called decision trees
    show the likelihood of certain outcomes in
    contrast to alternatives.
    REFERENCES

    • Introduction to Decision Analysis. studylib.net. (2022). Retrieved from


    https://studylib.net/doc/5810351/introduction-to-decision-analysis.
    • What is Sensitivity Analysis?. Corporate Finance Institute. (2022). Retrieved from
    https://corporatefinanceinstitute.com/resources/knowledge/modeling/what-is-
    sensitivity-analysis/.
    • Garg, S. (2022). Sensitivity analysis. Slideshare.net. Retrieved from
    https://www.slideshare.net/ShivangiGarg22/sensitivity-analysis-66063896.
    • Sensitivity Analysis: Meaning, Uses, Methods of measurement. EduPristine. (2022).
    Retrieved 3 August 2022, from https://www.edupristine.com/blog/all-about-
    sensitivity-analysis.
    • Decision Analysis (DA). Corporate Finance Institute. (2022). Retrieved 3 August
    2022, https://corporatefinanceinstitute.com/resources/knowledge/other/decision-
    analysis-da/.
    • Decision Tree. Corporate Finance Institute. (2022). Retrieved 3 August 2022, from
    https://corporatefinanceinstitute.com/resources/knowledge/other/decision-tree/.
    • Sensitivity Analysis. (2020). [Image]. Retrieved from
    https://m.youtube.com/watch?v=o6-HCOG1Cp4&t=21s.
    Thank you!!!

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