PROBE–A multicriteria decision support system for portfolio robustness evaluation

PROBE–A multicriteria decision support system for portfolio robustness evaluation

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Article ID: iaor20127372
Volume: 54
Issue: 1
Start Page Number: 534
End Page Number: 550
Publication Date: Dec 2012
Journal: Decision Support Systems
Authors: , ,
Keywords: investment
Abstract:

This paper addresses the problem of selecting a robust portfolio of projects in the context of limited resources, multiple criteria, different project interactions and several types of uncertainty. A portfolio of projects is considered an undoubtedly robust choice if for a given uncertainty domain that affects the costs and/or the benefits of the projects there is no other portfolio that does not cost more and simultaneously may provide more overall benefit. We present a new decision support system, PROBE (Portfolio Robustness Evaluation), and the algorithms it implements. PROBE identifies all efficient portfolios and depicts the respective Pareto frontier within a given portfolio cost range, and permits users to analyze, in depth, the robustness of selecting a proposed portfolio. The robustness evaluation starts by identifying competitor portfolios to the proposed portfolio, its similarities and differences in project composition to its competitors, and the regret a decision‐maker may have by selecting the proposed portfolio instead of a competitor.

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