A Portfolio Analysis for Termopower Generation Using Fuzzy Real Options and Genetic Algorithm

Abstract

In Brazil, large players in Energy Market dedicate many efforts in valuation and optimal capital allocation decision for their projects implementation, due the large candidate projects number in their investment portfolios. These decisions aim to choose the projects subset to be implemented, because the monetary resources are generally smaller than necessary for all projects. There are presented many risks that increase as the risks and uncertainties deal with analysis and optimal decisions.The classical methods to investment portfolios valuation are based on maximizing the returns and minimizing the risks. These classical methods may not be able to handle properly the Real Options of projects, their risks and uncertainties.This paper presents a Fuzzy Real Option model portfolio analysis for valuation phase and a genetic algorithm for optimization phase. A real case is presented to illustrate the methodology.