UEP HELP
We have attempted to make UEP intuitive. Hovering the mouse pointer above entry titles, radio buttons, entry fields, and other areas for brief descriptions. Click the Symbols link for a quick reference to key variables and parameters.
Please visit (how you got to UEP):
http://www.maxvalue.com/online.htm
Login, if you're not already, and you will find:
There, click either the “Utility Elicitation Program” video or the “UEP User Guide” pdf document. Other resources listed may be of interest. (Not related to UEP is the “Critical Chain Simulation,” a project simulation model.)"
Here are help topics inside the UEP User Guide:
Symbols
Question Parameters
Currency Units
Utility Calculations
Question Codes
UEP Symbols
Here are the symbols in UEP and brief definitions:
| Symbol or Term | Definition |
|---|---|
| CE | Certain equivalent. This is the cash-in-hand value of a risk. |
| DROI | Discounted Return on Investment. DROI = EMV / |-NPVf|. This is a popular ranking criterion with limited capital. |
| EMV | Expected Monetary Value = expected value NPV. |
| EU | Expected (value) Utility. |
| NPVs | Net Present Value of the Success (or best or bad) outcome. |
| NPVf | Net Present Value of the Failure (or good or worst) outcome. |
| For CE questions and both outcomes are positive: | |
| NPVf = good < best = NPVs. | |
| For CE questions and both outcomes are negative: | |
| NPVf = worst < bad = NPVs. | |
| Ps | Probability of success. Or, probability of the better outcome. |
| PsBE | Probability of success at BreakEven (where EMV = 0). |
| P(profit with 10) | The probability of NPV>0 for a portfolio of 10 identical, independent projects like this one. Alternate symbol: "Ps 10X". |
| r or RTC | Risk Tolerance Coefficient (RTC or r). This the scaling factor for risk policy. Helping you assess r is the purpose and outcome of UEP. Higher r means you are more risk-tolerant. |
| Share | Fractional ownership of a large project or large risky asset. The optimal Share gives you the highest CE. |
Utility equations:
Key relationships:
NPVf < CE ≤ EMV
As r → ∞, CE → EMV
As r → 0, CE → NPVf
