Contingent Portfolio Programming for the Management of Risky Projects

Janne Gustafsson () and Ahti Salo ()
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Janne Gustafsson: Systems Analysis Laboratory, Helsinki University of Technology, Otakaari 1M, P.O. Box 1100, 02015 HUT, Finland
Ahti Salo: Systems Analysis Laboratory, Helsinki University of Technology, Otakaari 1M, P.O. Box 1100, 02015 HUT, Finland

Operations Research, 2005, vol. 53, issue 6, 946-956

Abstract: Methods for selecting a research and development (R&D) project portfolio have attracted considerable interest among practitioners and academics. This notwithstanding, the industrial uptake of these methods has remained limited, partly because of the difficulties of capturing relevant concerns in R&D portfolio management. Motivated by these difficulties, we develop contingent portfolio programming (CPP), which extends earlier approaches in that it (i) uses states of nature to capture exogenous uncertainties, (ii) models resources through dynamic state variables, and (iii) provides guidance for the selection of an optimal project portfolio that is compatible with the decision maker’s risk attitude. Although CPP is presented here in the context of R&D project portfolios, it is applicable to a variety of investment problems where the dynamics and interactions of investment opportunities must be accounted for.

Keywords: research and development: project selection; decision analysis: theory; programming: linear; applications (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (16)

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