A probabilistic portfolio budget allocation problem with CPI index under risk

Abstract

The portfolio budget allocation plays an important role in making appropriate decisions in management systems. Budget allocation is also crucial when the nature of an organization is based on projects like construction organizations. The proposed model, in this paper, considers portfolio budget allocation when there is an uncertainty associated with input/output parameters. A probabilistic model based on project cost performance index (CPI) is then proposed where risky conditions are considered for each project and are solved using a recent robust optimization technique. The resulted nonlinear optimization problem is handled using CVX as a comprehensive decision support framework for solving cone programming problems. The implementation of the proposed model has been verified using various kinds of test problems and the results are finally discussed.