Optimization in Investment Management with Uncertain data

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Samieenia, Mohammad Javad | 2009

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 39493 (01)
University: Sharif University of Technology
Department: Industrial Engineering
Advisor(s): Modarres Yazdi, Mohammad
Abstract:
In this thesis, first, the problem of valuation of a portfolio is considered. This portfolio consists of some risky assets and real options written on them, with capital budgeting constrain. Three major elements of this problem are: portfolio, capital budgeting and real options. After reviewing the relevant literature, we develop a framework for managerial decisions about risky assets, by applying of Option Valuation Theory and Stochastic Dynamic Programming. The objective is to fill the gap in the valuation literature and propose a model that considers three aspects of investment decisions– portfolio approach, capital budgeting and real options- simultaneously. The proposed model demonstrates that existence of interactions between assets and options can make the valuation problem more complicated than what has been explored in researches.
We also generalize the classical “best choice” problem which is a class of sequential search and selection problems. We obtain the optimal stopping policies with different criteria and show that it is possible to reduce a multivariate sequence to a univariate one
Keywords:
Stochastic Dynamic Programming ; Real Option Method ; Portfolio ; Investment Management ; Valuation ; Optimal Stopping Rule

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