A Mixed Dynamic Investment Projects and Securities Portfolio Selection Using Stochastic Programming

Most of the time, because of the variety of activities and continuous changes of the environment of each field of activity, Project-Oriented Companies (POC) are more exposed to dangers of the environment than any other types of companies. To reduce the amount of risk encountered, after some time, these companies begin to invest part of their capital in other different safer areas to avoid bankruptcy. As a classic subject, most researches are related to either selecting a portfolio of projects or a set of securities, while in this paper both issues are taken into consideration. In this paper, while focusing on the necessity of including more secure and prosperous assets in the portfolio of the POC, by explaining a mixed dynamic stochastic portfolio selection model, we try to propose a method to optimize portfolio selection from other alternatives (securities and investment projects). The scenarios generated on the basis of the idea matching moments of the asset returns, is going to be used for the multi-stage stochastic programming of projects and securities portfolio selection. At the end, to demonstrate the solution procedure with an interpretation of the optimal policy, an illustrative example is solved.

Keywords:

Stochastic Programming , Mixed Portfolio Selection , Dynamic Programming , Project-Oriented Companies