C2 AND LPU2 COMBINATIONS FOR TREATING DIFFERENT RISKS AND UNCERTAINTIES IN CAPITAL BUDGETS

Abstract

Chance Constrained (C sup 2) Programming and Linear Programming under Uncertainty (LP(U sup 2)) are joined together in order to deal with different risks and uncertainties which are commonly encountered in capital budgeting. This includes payback period protection via chance constraints formulated to cover (or bound) a possible loss of future opportunities during the payback period. It also includes liquidity requirements formulated preemptively via (LP(U sup 2)) to provide protection against possible cash (or liquidity) shortages at specified times. The case of arbitrary discrete distributions is examined and new formulations are developed which model economic, statistical, and technological decision interdependencies. Relations to geometric programming are indicated prior to reducing these formulations to zero-one integer programming (deterministic) equivalents. Duality relations obtained from these formulations provide separate evaluators for yield, risk, portfolio and liquidity effects of cash investment. Finally, relations to 'Balas-type' subsidy and penalty adjustments are noted.

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Document Details

Document Type
Technical Report
Publication Date
Nov 01, 1969
Accession Number
AD0710640

Entities

People

  • Abraham Charnes
  • K. O. Kortanek
  • R. Byrne
  • William W. Cooper

Organizations

  • Carnegie Mellon University

Tags

Communities of Interest

  • C4I

DTIC Thesaurus Topics

  • C Programming Language
  • Computer Programming
  • Data Science
  • Discrete Distribution
  • Geometric Programming
  • Information Science
  • Integer Programming
  • Investments
  • Linear Programming
  • Money
  • Probability
  • Probability Distributions
  • Random Variables
  • Statistical Distributions
  • Statistics
  • Uncertainty

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