Engineering Economics for Aviation and Aerospace by Bijan Vasigh & Javad Gorjidooz

Author:Bijan Vasigh & Javad Gorjidooz [Vasigh, Bijan]
Language: eng
Format: azw3
ISBN: 9781138185777
Publisher: Taylor and Francis
Published: 2016-12-08T05:00:00+00:00

Probability and Business Decisions

Probability concepts are mathematical tools used by decision makers to identify the degree of risk associated with any project. Probability theory has many practical applications in inventory management, data analysis, revenue management, passenger no-show behavior, and aircraft maintenance and reliability. In finance, probability theory has extensive applications in portfolio management and risk analysis. Probability is particularly important in the areas of quality engineering and biomedical engineering, and in estimating the reliability component and system. Contemporary applications of probability theory run the gamut of business investment including portfolio theory, investment analysis, and capital budgeting. Knowledge of modern probability theory is vital to develop economic modeling and test the veracity through analysis of real world data. Probability and statistics could help to understand the Black–Scholes option pricing model (Black and Scholes, 1973) to develop pricing models for financial assets such as equities and bonds, and the Capital Asset Pricing Model (CAPM).

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