Question

What is the concept of EMV and EVPI?

Answer 1

Explanation:

The expected value with perfect information is the amount of profit foregone due to uncertain conditions affecting the selection of a course of action. ... The difference between EPC and EMV of optimal action is the amount of profit foregone due to uncertainty and is equal to EVPI.

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Answer 2

Ending Market Value (EMV) and EXPECTED VALUE WITH PERFECT INFORMATION (EVPI)

Ending Market Value (EMV):

Ending market value in stock investing refers to the value of the investment at end of that investment duration. The formula of ending market value is as follows,

$EMV=BMV\times(1+r)$

where BMV is the Beginning market value ; r is the Interest rate

EXPECTED VALUE WITH PERFECT INFORMATION (EVPI):

EVPI can be evaluated by subtracting the value of EMV (Ending Market Value) from EPC (Expected Payoff under Certainty). The formula of EVPI is as follows

$EVPI = EPC - EMV$

where EPC is Expected Payoff under Certainty; EMV is Ending Market Value.