Risk in Cost-Benefit Analysis

General Aviation: An Industry Overview

Publication Type:
Research Report 110

Publication Subject(s):



Release Date:
April 2005

For cost-benefit analyses (CBA) of public-sector projects, a common misconception is that the discount rate should include a risk premium in consonance with the private-sector practice of doing so. In examining the issue, this report addresses different types of risk separately including downside risk, which arises from optimistic bias in forecasts and pure risk, which is the variation remaining around the mean after removing downside biases.