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Sensitivity Analysis

2021-09-24 | UPSC

Sensitivity analysis is one of the methods used to examine the uncertainty in economic evaluation of investment projects. The sensitivity factors which have important influence on the economic benefit index of an investment project are gradually identified from multiple uncertainty factors, and the influence degree and sensitivity degree of the economic benefit index of the project are further measured, and then the risk bearing ability of the project is evaluated. If a small change of a parameter can lead to a large change of economic benefit index, it is called a sensitive factor; otherwise, it is called a non-sensitive factor. The disadvantage of this method is that only one factor is allowed to change at a time while others are assumed to remain invariable, which may not be consistent with the actual situation.

Edited and translated by Zhang Yifei