Portfolio Decision Analysis: Lessons from Military Applications

Roger Chapman Burk () and Gregory S. Parnell ()
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Roger Chapman Burk: US Military Academy, West Point
Gregory S. Parnell: US Military Academy, West Point

Chapter Chapter 14 in Portfolio Decision Analysis, 2011, pp 333-357 from Springer

Abstract: Abstract We review the use of portfolio decision analysis in military applications, such as weapon systems, types of forces, installations, and military research and development projects. We start by comparing military and commercial portfolio problems in general, discussing the distinguishing characteristics of the military decision environment: hostile and adaptive adversaries, a public decision process with multiple stakeholders, and high system complexity. Then we list and summarize 24 military DA applications published from 1992 to 2010. We find that the most widespread prominent feature of these applications is the careful modeling of value from multiple objectives. Mathematical optimization is not so common, but it can be important when a large number of interdependencies or side constraints makes it hard to find good feasible candidate portfolios. Quantitative methods of accounting for risk are surprisingly rare, considering the high level of uncertainty in the military environment. We analyze six of the applications in more detail, looking at how they model portfolio value calculation, swing weight assessment, constraints and dependencies, and uncertainty and risk. An appendix provides a recommended procedure for portfolio decision analysis based on the authors’ experience and the applications reviewed.

Keywords: Decision Analysis; Military Application; Portfolio Problem; Portfolio Analysis; Stakeholder Representative (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1007/978-1-4419-9943-6_14

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