Decision trees and dealing with uncertainty

Introduction

This course is concerned with using decision trees to simplify and formulate business decisions, typically using financial information. As decisions affect the future well-being of an organisation, they almost always rely on some form of forecast information. In this course, you will consider the subject of uncertainty in a financial context and meet a few ways of dealing with it, including a basic introduction to probability. This will help you to understand a common approach to dealing with financial information known as an ‘expected value’.

Once you have a basic understanding of probability, you will then use that knowledge in the context of a powerful and sophisticated technique referred to as a ‘decision tree’. This technique allows you to consider, simultaneously, a variety of possible outcomes and to find the optimal decision for the organisation.

This OpenLearn course is an adapted extract from the Open University course B874 Finance for strategic decision-making [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] .