Planning resource allocation for husbandry management by portfolio optimization

Abstract

The husbandry management is assessed in general by comparison of current and past economical results, which are used as a universal business metric. Sustainable management in general targets minimization of risk and maximization of the return for managing business activities. The minimization of the economic risk allows for decreasing the potential losses for the husbandry management and they are leading criteria for planning future resource allocations. The new point added in this research concerns simultaneously inclusion in the portfolio problem the risk formalization both as a standard deviation of return and the probability for losses as value-at-risk. Several portfolio problems are defined, considering the probability of losses as a goal function or constraint in the portfolio problems. The inclusion of these two formalizations allows the portfolio risk to decrease additionally in comparison with the classical portfolio problems, where the risk is quantified as a standard deviation of the portfolio return. The peculiarities of these problems and the corresponding optimal solutions are analyzed, which allows quantifying the resource allocation per different business activities. Numerical experiments are made with real data on animal husbandry, available from the Bulgarian National Statistics and the results are illustrated in a graphical way. The empirical comparison with these data gives benefits in decreasing the risk when both risk formalizations are applied in the portfolio problem.