6. Mathematical Methods for Making Investment Decisions

Investment to the development of economic processes and systems always entails risks. Not adequately reasoned investment decision can cause adverse economic consequences for the investor. Making investment decisions becomes more complicated because of high degree of uncertainty of economic consequences of investments. Mathematical methods and models proposed in the chapter represent an integrated methodology of making investment decisions that enables to reduce risks, more objectively estimate probability of investment consequences and equip the investor with a practical instrument of scientifically-based forecasting. A review of a variety of methodological approaches to risk studying shows that researchers mainly focus their attention on the entrepreneurial risk, i.e. as the object of analysis they consider individual enterprises, and the subjects of their investigations are statistical variations in stochastic probability distributions of all possible losses and damages. At the same time, insufficient attention is given to the investigation of principles of functioning and forms of manifestation of nonstatistical risks, their influence on the entrepreneurial activity and interaction with statistical risks. This research suggests a methodological base for creation of an integral expert system supporting coordinated investment decisions with account for assessment and control of project risks.