The valuation of RFID investment using fuzzy real option

Net present value (NPV) and return on investment (ROI) are commonly used to evaluate investment in new technologies. Sometimes, however, measuring the value of investment in new IT becomes very difficult due to its wide scope of application coupled with embedded options in its adoption. Therefore, comprehensive but easily understandable methodologies are needed to solve the complicated problems resulting from the complexity of new technologies. This paper employs a real option analysis to evaluate RFID adoption in the supply chain. Real options analysis should be a better way to evaluate a disruptive technology like RFID. However, the pure (probabilistic) real option rule characterizes the present value of expected cash flows and the expected costs by a single number, which is not realistic in many cases. To solve the problem, this paper considers the real option rule in a more realistic setting, namely, when the present values of expected cash flows and expected costs are estimated by trapezoidal fuzzy numbers. Specifically, it drew out their means and variance and presented a method of calculating fuzzy real options through numerical value examples of RFID investment assuming the current value of expected cash flow and investment costs using trapezoid fuzzy number fuzzy real options. Since advanced information technology such as RFID has very high risk and options such as change, extension, delay and withdrawal, etc., investment valuation using the real options technique should be done, and in the process, in a more realistic and practical approach, the fuzzy real options model presented in this study is judged to be useful.     

A fuzzy real option approach for investment project valuation

The main purpose of this paper is to propose a fuzzy approach for investment project valuation in uncertain environments from the aspect of real options. The traditional approaches to project valuation are based on discounted cash flows (DCF) analysis which provides measures like net present value (NPV) and internal rate of return (IRR). However, DCF-based approaches exhibit two major pitfalls. One is that DCF parameters such as cash flows cannot be estimated precisely in the uncertain decision making environments. The other one is that the values of managerial flexibilities in investment projects cannot be exactly revealed through DCF analysis. Both of them would entail improper results on strategic investment projects valuation. Therefore, this paper proposes a fuzzy binomial approach that can be used in project valuation under uncertainty. The proposed approach also reveals the value of flexibilities embedded in the project. Furthermore, this paper provides a method to compute the mean value of a project’s fuzzy expanded NPV that represents the entire value of project. Finally, we use the approach to practically evaluate a project.     

A Probabilistic and Decision Attitude Aggregation Operator for Intuitionistic Fuzzy Environment

In this paper, a new operator for aggregation of uncertain information under intuitionistic fuzzy environment is proposed. A novel approach is proposed for the selection of best alternative action in the face of the imprecise probabilities and the complex attitudinal character of the decision makers (DMs). This approach is distinguished with its capacity to accommodate the linguistic specification of probabilities as provided by human experts directly without the need to determine the fuzzy membership grades. The focus is to compute the net payoff for each alternative in the face of uncertain states of nature and DM's attitude. The proposed operator and the approach are illustrated through two real case studies.     

Using computational methodology to price European options with actual payoff distributions

Most option pricing methods use mathematical distributions to approximate underlying asset behavior. However, pure mathematical distribution approaches have difficulty approximating the real distribution. This study first introduces an innovative computational method for pricing European options based on the real payoff distribution of the underlying asset. This computational approach can also be applied to applications related to expected value that require real distributions rather than mathematical distributions. This study makes the following contributions: (a) solving the risk neutral issue related to price options with real payoff distributions; (b) proposing a simple method for adjusting standard deviation based on the need to apply short term volatility to real world applications; (c) demonstrating an option pricing algorithm that is easy to apply to cross field applications.     

A fuzzy ID3 induction for linguistic data sets

In real life, humans communicate by means of words. Computing with words enables flexibility via fuzzy logic to reach more informative results for the classification and decision‐making. Fuzzy logic handles the imprecise information. In our paper, we propose a novel fuzzy ID3 algorithm for the classification on linguistic data set, where data can be given as linguistic variables. Linguistic variables are defined by using triangular fuzzy numbers given as LR (left‐right) fuzzy numbers. And weighted averaging based on levels (WABL) method is used as the defuzzification method for each data. Then, fuzzy c‐means algorithm is performed to handle the membership degrees for each variable given in each data set used in an experimental study. At last, the fuzzy ID3 algorithm is applied. The rules are generated, and the reasoning is done by different T‐operators. Our study is encouraged by (using) statistical analysis. In conclusion, it is seen that our algorithm proposed for linguistic data is as good as the proposed approach for numeric data. Also, it is shown that the proposed linguistic approach by using different T‐operators on linguistic data gives better results than numerical approach on some data sets.     

Linguistic hesitant intuitionistic fuzzy decision-making method based on VIKOR

Linguistic hesitant intuitionistic fuzzy set, which allows an element having several linguistic evaluation values and each linguistic argument having several intuitionistic fuzzy memberships, is a power tool to model uncertain information existing in multiple attribute decision-making problems. In this paper, we propose new methods by using TOPSIS and VIKOR for multiple attribute decision-making problems, in which evaluation values are in the form of linguistic hesitant intuitionistic fuzzy elements. Different situations of attribute weight information are considered. If attribute weights are partly known, a linear programming model is set up based on the idea that reasonable weights should make the relative closeness of each alternative evaluation value to the linguistic hesitant intuitionistic fuzzy positive ideal solution as large as possible. If attribute weights are unknown completely, an optimization model is set up based on the maximum deviation method. A numerical example is presented to illustrate feasibility and practical advantages of the proposed method. We compare the alternatives’ rankings derived from the linguistic hesitant intuitionistic fuzzy TOPSIS method with those derived from the hesitant fuzzy linguistic TOPSIS and the hesitant intuitionistic fuzzy TOPSIS approach to further illustrate their advantages.

     

Extension of the VIKOR method for group decision making with extended hesitant fuzzy linguistic information

Group decision-making approaches are very important due to the complexity and uncertainty of many real-world decision-making problems. Some of the decision-making problems are defined in qualitative frameworks. Extended hesitant fuzzy linguistic term set (EHFLTS) is proposed as a new and powerful tool for elicitation of hesitant qualitative information in group decision-making process. In this paper, we first introduced the comparison laws and a family of distance and similarity measures for extended hesitant fuzzy linguistic terms (EHFLTs) and EHFLTSs, respectively. Next, we developed the extended hesitant fuzzy linguistic (EHFL)-VIKOR method as a qualitative multi-attributes group decision-making approach based on the EHFLTS distance measures to deal with the qualitative hesitancy in group decision making. Finally, we presented an application example about selection of suitable telecommunications service provider of small- and medium-sized enterprises to verify applicability and validation of proposed method in the process of qualitative group decision making.

     

Bewertung von Discountoptionen bei Softwarelizenzverträgen

Many companies increasingly rely on licensed standard software for system software and applications. In addition to the regulation of usage conditions, software licensing agreements increasingly include services, such as software upgrades and user training, as a part of the contract or these are optional for a fee, which can be made use of by the licensee during the term of the contract at a reduced price or as a free service. This benefit entitlement is called a discount option and must be valued during the selection and designing of a contract. This paper describes the basic valuation issues as well as some weaknesses of previous approaches, and subsequently presents a model which, on the basis of the real option theory, enables an assessment of the discount options using mathematical methods. As the value of discount options can in many cases only be estimated by using analytical methods under certain conditions, a practical solution method is explained on the basis of numeric backwards induction. The procedure for applying the model and the achieved advances in knowledge are illustrated with an example.     

Comparison of fuzzy forecaster to a statistically motivatedforecaster

Recently a fuzzy forecaster (also called a fuzzy controller) was proposed as one method for forecasting an autoregressive time series. The approach in the fuzzy forecaster is similar to the approach in statistically motivated curve smoothers. However, the curve smoothers perform a beneficial type of data averaging that the current fuzzy forecasters do not employ. Also, the curve smoothers have a mature methodology for choosing the degree of smoothing. Therefore, in this paper we develop an enhanced fuzzy forecaster that uses some of the curve-smoother methodology and we compare the performance of the improved fuzzy forecaster to one particular curve smoother (loess) on five real and five simulated data sets. The performance criterion is the one-step-ahead forecast error variance, and the loess method outperforms the fuzzy forecaster on all five simulated data sets, and four of the five real data sets     

A Novel Approach for Linguistic Group Decision Making Based on Generalized Interval‐Valued Intuitionistic Fuzzy Linguistic Induced Hybrid Operator and TOPSIS

In the multiple attribute linguistic group decision making analysis with interval‐valued intuitionistic fuzzy linguistic information, seeking highly efficient aggregation method and order relation play a crucial role. In this paper, we redefine an interval‐valued intuitionistic fuzzy linguistic variable that considers principal component and propose generalized interval‐valued intuitionistic fuzzy linguistic induced hybrid aggregation (GIVIFLIHA) operator with entropic order‐inducing variable and interval‐valued intuitionistic fuzzy linguistic technique for order preference by similarity to an ideal solution (TOPSIS) order relation based on interval‐valued intuitionistic fuzzy linguistic distance measure. Then, some primary properties of the GIVIFLIHA operator are discussed, and a linguistic group decision‐making approach based on GIVIFLIHA operator and interval‐valued intuitionistic fuzzy linguistic TOPSIS order relation is proposed. Finally, a numerical example concerning the investment strategy is given to illustrate the validity and applicability of the proposed method, and then the method is compared with the existing method to further illustrate its flexibility.     

Fuzzy bounded least-squares method for the identification of linearsystems

This paper presents the fuzzy bounded least-squares method which uses both linguistic information and numerical data to identify linear systems. This method introduces a new type of fuzzy system, i.e., a fuzzy interval system. The steps in the method are as follows: 1) to utilize all the available linguistic information to obtain a fuzzy interval system and then to use the fuzzy interval system to give the admissible model set (i.e., the set of all models which are acceptable and reasonable from the point of view of linguistic information); 2) to find a model in the admissible model set which best fits the available numerical data. It is shown that such a model can be obtained by a quadratic programming approach. By comparing this method with the least-squares method, it is proved that the model obtained by this method fits a real system better than the model obtained by the least-squares method. In addition, this method also checks the adequacy of linear models for modeling a given system during the identification process and can help one to decide whether it is necessary to use nonlinear models     

A method based on preference degrees for handling hybrid multiple attribute decision making problems

In this paper, we investigate hybrid multiple attribute decision making problems with various forms of attribute values (real numbers, linguistic labels, interval numbers, intuitionistic fuzzy numbers and interval intuitionistic fuzzy numbers). We propose a method based on preference degrees which may take the forms of fuzzy numbers, intuitionistic fuzzy numbers and interval intuitionistic fuzzy numbers. The method first normalizes various forms of attribute values into preference degrees, and then uses a preference degree-based weighted averaging operator to aggregate the normalized preference degrees. Meanwhile, for convenience of calculation, a new linguistic representation model is presented, whose feasibility is verified by comparing it with the traditional 4-tuple linguistic representation model, and from our model, the mapping relationship between interval intuitionistic fuzzy numbers and linguistic labels can be constructed. Finally, we illustrate the rationality and practicality of the proposed method by an application example.     

Investment project valuation based on a fuzzy binomial approach

The typical approaches to project valuation are based on discounted cash flows (DCF) analysis which provides measures like net present value (NPV) and internal rate of return (IRR). DCF-based approaches exhibit two major pitfalls. One is that DCF parameters such as cash flows cannot be estimated precisely in an uncertain decision making environment. The other one is that the values of managerial flexibilities in investment projects cannot be exactly revealed through DCF analysis. Both of them would have significant influence on strategic investment projects valuation. This paper proposes a fuzzy binomial approach that can be used in project valuation under uncertainty. The proposed approach also reveals the value of flexibilities embedded in the project. Furthermore, this paper provides a method to compute the mean value of a project’s fuzzy NPV. The project’s fuzzy NPV is characterized with right-skewed possibilistic distribution because these flexibilities retain the upside potential of profit but limit the downside risk of loss. Finally, this paper discusses the value of multiple options in a project.     

Type‐1 OWA Unbalanced Fuzzy Linguistic Aggregation Methodology: Application to Eurobonds Credit Risk Evaluation

In decision making, a widely used methodology to manage unbalanced fuzzy linguistic information is the linguistic hierarchy (LH), which relies on a linguistic symbolic computational model based on ordinal 2‐tuple linguistic representation. However, the ordinal 2‐tuple linguistic approach does not exploit all advantages of Zadeh's fuzzy linguistic approach to model uncertainty because the membership function shapes are ignored. Furthermore, the LH methodology is an indirect approach that relies on the uniform distribution of symmetric linguistic assessments. These drawbacks are overcome by applying a fuzzy methodology based on the implementation of the type‐1 ordered weighted average (T1OWA) operator. The T1OWA operator is not a symbolic operator and it allows to directly aggregate membership functions, which in practice means that the T1OWA methodology is suitable for both balanced and unbalanced linguistic contexts and with heterogeneous membership functions. Furthermore, the final output of the T1OWA methodology is always fuzzy and defined in the same domain of the original unbalanced fuzzy linguistic labels, which facilitates its interpretation via a visual joint representation. A case study is presented where the T1OWA operator methodology is used to assess the creditworthiness of European bonds based on real credit risk ratings of individual Eurozone member states modeled as unbalanced fuzzy linguistic labels.     

A new hesitant fuzzy linguistic approach for multiple attribute decision making based on Dempster–Shafer evidence theory

Hesitant fuzzy linguistic term sets (HFLTSs) are useful tool to represent qualitative information in multiple attribute decision making (MADM), and Dempster–Shafer evidence theory (DSET) has some advantages in denoting and fusing uncertain information. The goal of this paper is to develop a new hesitant fuzzy linguistic (HFL) MADM approach based on the DSET. To realize this goal, we propose a method of converting the original decision matrix expressed by HFLTSs into the evidence matrix with HFLTSs, and develop a weight-determining model for MADM problems with HFL information. Further, in order to integrate the evidences with HFLTSs under all attributes, we propose a combination algorithm for MADM problems based on the combination rule of DSET. Based on these studies, we develop a HFL-DSET approach for MADM problems with unknown weights. Furthermore, an applicable example for supplier selection is used to illustrate the proposed approach. Lastly, some comparative analyses with other HFL-MADM methods are conducted to show the feasibility and superiority of the proposed approach.     

Evaluating emergency response capacity by fuzzy AHP and 2-tuple fuzzy linguistic approach

Emergency management (EM) is a very important issue with various kinds of emergency events frequently taking place. One of the most important components of EM is to evaluate the emergency response capacity (ERC) of emergency department or emergency alternative. Because of time pressure, lack of experience and data, experts often evaluate the importance and the ratings of qualitative criteria in the form of linguistic variable. This paper presents a hybrid fuzzy method consisting fuzzy AHP and 2-tuple fuzzy linguistic approach to evaluate emergency response capacity. This study has been done in three stages. In the first stage we present a hierarchy of the evaluation index system for emergency response capacity. In the second stage we use fuzzy AHP to analyze the structure of the emergency response capacity evaluation problem. Using linguistic variables, pairwise comparisons for the evaluation criteria and sub-criteria are made to determine the weights of the criteria and sub-criteria. In the third stage, the ratings of sub-criteria are assessed in linguistic values represented by triangular fuzzy numbers to express the qualitative evaluation of experts’ subjective opinions, and the linguistic values are transformed into 2-tuples. Use the 2-tuple linguistic weighted average operator (LWAO) to compute the aggregated ratings of criteria and the overall emergency response capacity (OERC) of the emergency alternative. Finally, we demonstrate the validity and feasibility of the proposed hybrid fuzzy approach by means of comparing the emergency response capacity of three emergency alternatives.     

Fuzzy arithmetic based reliability allocation approach during early design and development

During early design and development stages, every engineering system has to meet its specific reliability goals. The target reliability of the system is achieved through application of an effective reliability apportionment technique to its subsystems. There are various traditional methods exist to perform the reliability allocation based on engineering factors that are assessed in a subjective manner. The conventional reliability allocation approach requires the assessment of factors like complexity, cost, and maintenance. This may not be realistic in real applications if they are assessed in a crisp manner by the domain experts of their varied expertise and background.In this paper, we treat allocation factors as fuzzy numbers, which are evaluated in fuzzy linguistic terms. As a result, fuzzy proportionality factor scales are proposed for the subsystems. In order to accomplish fuzzy division to evaluate the fuzzy proportionality factor, an approximation method based on linear programming for trapezoidal fuzzy numbers is also proposed in this paper. For the evaluation of weighting factors from fuzzy proportionality factors, centroid method of defuzzification is being employed. The allocated reliability of each subsystem is computed with the help of weighting factor thereafter. An example is provided to illustrate the potential application of the proposed fuzzy based reliability allocation approach.     

GROUP DECISION-MAKING WITH A FUZZY MAJORITY VIA LINGUISTIC QUANTIFIERS. PART II: A COMPETITIVE-LIKE POOLING

Abstract

Starting from individual fuzzy preference relations, some (sets of) socially best acceptable options are determined, directly or via a social fuzzy preference relation. An assumed fuzzy majority rule is given by a fuzzy linguistic quantifier, e.g., “most.” Here, as opposed to Part I, where we used a consensory-like pooling of individual opinions, we use an approach to linguistic quantifiers that leads to a competitive-like pooling. Some solution concepts are considered: cores, minimax (opposition) sets, consensus winners, and so forth,     

Decision making with fuzzy probability assessments

We discuss the idea of a fuzzy probability assessment, the association a collection of fuzzy probabilities with the outcomes of a random experiment. Fuzzy probability assessments often result from the linguistic specification of probabilities as provided by human experts. The question of consistency of the fuzzy probability assessment is considered. Finally, the problem of decision-making, selecting a best alternative action, in the face of a fuzzy probability assessment is investigated. Here we focus on the issue of obtaining the expected payoff of alternatives in the face of a fuzzy probability assessment. In the course of solving this problem we develop a representation of an effective probability distribution in the face of a fuzzy probability assessment     

Formulation of linguistic regression model based on natural words

When human experts express their ideas and thoughts, human words are basically employed in these expressions. That is, the experts with much professional experiences are capable of making assessment using their intuition and experiences. The measurements and interpretation of characteristics are taken with uncertainty, because most measured characteristics, analytical result, and field data can be interpreted only intuitively by experts. In such cases, judgments may be expressed using linguistic terms by experts. The difficulty in the direct measurement of certain characteristics makes the estimation of these characteristics imprecise. Such measurements may be dealt with the use of fuzzy set theory. As Professor L. A. Zadeh has placed the stress on the importance of the computation with words, fuzzy sets can take a central role in handling words [12, 13]. In this perspective fuzzy logic approach is offten thought as the main and only useful tool to deal with human words. In this paper we intend to present another approach to handle human words instead of fuzzy reasoning. That is, fuzzy regression analysis enables us treat the computation with words. In order to process linguistic variables, we define the vocabulary translation and vocabulary matching which convert linguistic expressions into membership functions on the interval [0–1] on the basis of a linguistic dictionary, and vice versa. We employ fuzzy regression analysis in order to deal with the assessment process of experts from linguistic variables of features and characteristics of an objective into the linguistic expression of the total assessment. The presented process consists of four portions: (1) vocabulary translation, (2) estimation, (3) vocabulary matching and (4) dictionary. We employed fuzzy quantification theory type 2 for estimating the total assessment in terms of linguistic structural attributes which are obtained from an expert.This research was supported in part by Grant-in Aid for Scientific Research(C-2); Grant No.11680459 of Ministry of Education of Science, Sports and Culture.