Accession Number : AD0607064

Title :   THE EVALUATION OF RISKY INTERRELATED INVESTMENTS.

Descriptive Note : Technical rept. no. 73,

Corporate Author : STANFORD UNIV CALIF

Personal Author(s) : Hillier,Frederick S.

Report Date : 24 JUL 1964

Pagination or Media Count : 97

Abstract : A study was made of the problem of evaluating a set of risky interrelated investments. Choosing present value and expected utility of present value as criteria, exact and approximate procedures were developed for selecting the optimal combination of investments under various sets of assumptions. Necessary conditions for optimality were derived and a model for describing a proposed set of investments was developed. This model would be used for determining the mean, variance, and possibly the functional form of the probability distribution of present value. The question of when this distribution would be normal or approximately normal was extensively explored. Several models were developed for finding expected utility. Given these results, the problem can be solved by selecting the combination of investments which maximizes expected utility from among the feasible combinations for which the necessary conditions for optimality hold. The problem was also studied in a broader dynamic context. This study led to the formulation of a change-constrained mathematical programming model. (Author)

Descriptors :   (*MATHEMATICAL PROGRAMMING, OPTIMIZATION), (*GAME THEORY, ECONOMICS), NUMERICAL ANALYSIS, PROBABILITY, MONEY, LINEAR PROGRAMMING, MATHEMATICAL MODELS

Distribution Statement : APPROVED FOR PUBLIC RELEASE