A Class of Stochastic Investment Problems

James L. Fisher
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James L. Fisher: Operations Research Group, Case Institute of Technology, Cleveland, Ohio

Operations Research, 1961, vol. 9, issue 1, 53-65

Abstract: A decision maker, faced with investment opportunities that occur throughout time, must, when confronted with a particular investment, decide whether to accept the investment. The problem of determining optimal decision rules under these conditions is formulated as a stochastic process that can be analyzed by the functional equation of dynamic programming. Some simple investment problems involving a decision maker with fixed assets are formulated and for a specific example, solved numerically. As an extension of these simple situations, a problem based on a business application of investing a stream of assets is solved and optimal decision rules are presented.

Date: 1961
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