Transform Techniques in Cost Analysis
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Risk is a fact of life that must be addressed by cost analysts. The analyst cannot eliminate the risk but can, at least, capture, present, and explain the aspects of risk to the decision maker. Risk analysis is a procedure for analyzing how randomness affects the cost. To place a cost estimate in proper perspective, it must be viewed as a random variable produced by other random variables.
Cost analysts have used a variety of techniques including Monte Carlo simulation, additive and multiplicative moments, and simple sums and products of random variables to estimate risk. This paper applies the method of transformation to this problem.
KeywordsProbability Density Function Additive Model Multiplicative Model Dependent Random Variable Proper Perspective
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