Abstract
Financial planning has long been recognized as a problem in which uncertainty plays an important role. At the same time, the manager has to deal with a multiplicity of actors and, consequently, with a multiplicity of objectives. The framework described in this paper deals with both the uncertainty aspect and the multicriterial aspect of financial planning. It is based on two important developments in financial theory:
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a.
multi-factor representation of uncertainty
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b.
the revival of the concept of flexibility and its valuation through contingent claims analysis.
The approach is intended to support the planning process without assuming managers to be able to define exact weighting factors or to assess precise probability factors. Therefore, we believe the framework to have a good potential to be understood and used in practice.
In the Department of Finance at Erasmus University, the multifactorial approach to financial modelling is quite frequently discussed. The author is grateful to those participating in these discussions, especially to Willem-Max van den Bergh, Marc Goedhart, Winfried Hallerbach and Hans Schaffers.
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© 1989 Springer-Verlag Berlin Heidelberg
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Spronk, J. (1989). Multi Factorial Financial Planning. In: Lockett, A.G., Islei, G. (eds) Improving Decision Making in Organisations. Lecture Notes in Economics and Mathematical Systems, vol 335. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-49298-3_35
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DOI: https://doi.org/10.1007/978-3-642-49298-3_35
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