A Multi-stage Multi Criteria Model for Portfolio Management

Abstract

Today, portfolio management is an important task for all companies. The aim of portfolio selection is to choose a set of projects from a pool of possible projects such that the value of financial actions is maximized conditional on resource availability and technical limitations. However, existing portfolio selection methods and models do not significantly consider the dimension of time. Nevertheless, the best portfolio selection decisions depend on investor characteristics and expectations as well as the coordination of portfolio cash flows with financial plans. In this paper, we provide a goal programming model based on the current perception of the future prices of existing portfolio projects and present a plan for the selection of the optimal project portfolio by taking into account the flows desired by investors. Goal Programming (GP) is a very useful approach in the area of multiple criteria decision making that allows the decision maker to include multiple deviations of restrictions and goals, especially in the area of portfolio selection. This paper gives an application of GP to portfolio selection and analysis problems. To incorporate uncertainty into the model, portfolio prices and multiple criteria are considered in fuzzy conditions. In addition, we consider real option valuation in project portfolio management (PPM). We also present a method of fuzzifying PPM parameters using expert opinions. In applying the model, we consider a 6-project portfolio over five investment periods and compare the use of the model in fuzzy and non-fuzzy situations.