Financial pricing of software development risk factors

Michel Benaroch, Ajit Appari

Research output: Contribution to journalArticle

8 Scopus citations

Abstract

The ability to price (monetize) software development risks can benefit various aspects of software development. Cost estimators predict project cost by adjusting a project's nominal cost on the basis of risk factors' (cost drivers') expected values, but the predicted cost is often inaccurate because risk factors' actual values normally deviate from expectations. Because variability is a widely used risk measure in finance, this risk-pricing method relates risk factor variability to project cost variability. The method estimates two parameters for each risk factor: extra cost incurred per unit exposure and project sensitivity. Several areas can benefit from the benchmark risk-pricing parameters obtained when applying this method with a cost estimator such as Cocomo.

Original languageEnglish (US)
Article number5396317
Pages (from-to)65-73
Number of pages9
JournalIEEE Software
Volume27
Issue number5
DOIs
StatePublished - Sep 1 2010

Keywords

  • Cocomo
  • economics
  • extra cost per unit exposure
  • financial pricing
  • project sensitivity
  • risk factors
  • risk management
  • software development

ASJC Scopus subject areas

  • Software

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