Authors: Fateh Belaid
Addresses: CNRS/UMR 7218 LAVUE, ENSA PARIS, 3-15 Quai Panhard et Levassor, 75013 Paris, France
Abstract: The purpose of this paper is a quantitative study of the risk surrounding the main problem of investment decision making in project portfolio selection. The primary objective is to provide managers with a decision support tool allowing them to choose carefully their investment strategies and reduce risk of failure. The developed computer model consists of three major modules. The first module calculates projects cash-flow using a deterministic method. The second module calculates expected after tax net cash flows and estimates performance indicators for each realisation, thus yielding distribution of return for each project. The third module selects a set of projects (portfolio) using their covariance and semi-covariance matrix. In summary, we will define a selection model for portfolio management of investment projects that will not only take into account risk, but also the effect of the interdependence of projects. The model will be applied to a portfolio of projects in petroleum upstream.
Keywords: project management; decision making; portfolio optimisation; risk analysis; Monte Carlo simulation; upstream investments; decision support; investment strategies; failure; cash-flow projections; deterministic methods; tax; taxes; taxation; net cash flows; performance indicators; distribution yields; estimates; estimating; covariance; semi-covariance; matrixes; interdependence; petroleum industry; services operations; services management; informatics; logistics.
International Journal of Services Operations and Informatics, 2011 Vol.6 No.1/2, pp.160 - 181
Published online: 28 Jan 2011 *Full-text access for editors Access for subscribers Purchase this article Comment on this article