Statistical dependence in risk analysis for project networks using Monte Carlo methods |
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Institution: | 1. School of Business and Social Sciences, Antalya Bilim University, Çıplaklı District, Akdeniz Boulevard No:290 A Döşemealtı, Antalya, Turkey;2. Faculty of Economics and Administrative Sciences, Akdeniz University, Dumlupınar Boulevard, Campus, Antalya, Turky |
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Abstract: | Monte Carlo simulation of project networks is increasingly used by engineering firms to analyze schedule/cost risk for bidding purposes. However, one serious methodological flaw of most Monte Carlo simulations is the assumption of statistical independence of activity durations in the network. In this paper, a method is proposed to model and quantify positive dependence between uncertainty distributions of activities. This method inherits the theoretically sound foundations of the rank correlation method, but provides a less cumbersome method to elicit dependency information from project engineers. Details of the methodology are described along with an example of project risk analysis in a manufacturing domain (shipbuilding). |
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