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A Multicriteria Decision Making at Portfolio Management


Business Administration and Management

A Multicriteria Decision Making at Portfolio Management

Name and surname of author:

Jaroslav Charouz, Jaroslav Ramík

Year:
2010
Issue:
2
Keywords:
Multi-criteria decision making; Analytic hierarchy process; Portfolio management.
DOI (& full text):
Anotation:
The article deals with an application of the methodology of Analytic Hierarchy process (AHP) and also its newly developed modification named FVK at portfolio management. The method AHP was published…more
The article deals with an application of the methodology of Analytic Hierarchy process (AHP) and also its newly developed modification named FVK at portfolio management. The method AHP was published already in 1980s whereas FVK is a newly created tool enlarging application possibilities of the AHP. Both methods provide a mathematical support to human decision making process in many areas. They can be supportive for decision making in problems like buying a new car, buying a house, which could be a task for a private person, but this decision making methods could be also useful as a supportive tool for institutions. Just to give a support for solving a problem like selecting a new employee, how to lead marketing campaign or how a specific policy would influence voters. In short, both methods are based on defining decision criteria and variants in a logical hierarchy. In a process of structuralization of the problem we firstly decompose the decision problem analytically from the upper to the lowest level and then synthesis follows in evaluating the decision variants and eliciting the best one. We apply this multi-criteria methodology to the problem of a portfolio manager decision making when selecting the best possible instrument on the financial market for his use. This decision making method is useful because the portfolio manager is not able to evaluate too many parameters at the same time and objectively rank candidates. On a numerical example we demonstrate how convenient application of the above mentioned methods could show clear and objective way for finding a satisfactory solution of this problem.
Section:
Business Administration and Management

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