Purpose

To develop the theory and application of the grey prediction model, this investigation constructs a novel discrete grey Riccati model termed DGRM(1,1).

Design/methodology/approach

By examining a special kind of Riccati difference equation and the structure of the conventional discrete grey model (DGM), we advance a novel DGRM, and the model's prediction effect is evaluated by two numerical examples and an application case and compared with that of other conventional grey models.

Findings

The average relative simulation error of DGRM(1,1) does not change if the model is built after the original sequence has been transformed by a multiplier, and the new model is suitable to predict monotonically increasing, monotonically decreasing and unimodal sequences.

Practical implications

DGRM(1,1) is utilized to forecast the development cost of a small plane owned by the Aviation Industry Corporation of China (AVIC) with an original data sequence from 2006 to 2013. The outcomes indicate that DGRM(1,1) exhibits high precision and potential in development cost prediction.

Originality/value

Combining the Riccati difference equation with the conventional DGM, the author advances a new grey model that is suitable to predict three kinds of data series with different changing trends.