Multistage decision-making fuzzy methodology for optimal investments based on experts’ evaluations

• Published in: European journal of operational research 2014-01, Vol.232 (1), p.169-177
• Main Authors: Sirbiladze, Gia, Khutsishvili, Irina, Ghvaberidze, Bezhan
• Format: Article
• Language: English
• Subjects: Bicriteria discrete optimization problem; Credit risk; Decision making; Discriminant analysis; Discrimination measure; Experton; Fuzzy sets; Investments; Optimal investment; Optimization techniques; Risk analysis; Studies
• ISSN: 0377-2217; 1872-6860
• DOI: 10.1016/j.ejor.2013.06.035

•We developed a fuzzy methodology to make decision on an optimal investment in several projects.•The Kaufmann’s expertons method is used to establish the credit risk level for each project.•We have proposed a new modification of possibilistic discrimination analysis method.•The ranking of the projects with a minor credit risk is performed based on this method.•Several projects to investment are chosen by solving the bicriteria optimization problem. A new methodology of making a decision on an optimal investment in several projects is proposed. The methodology is based on experts’ evaluations and consists of three stages. In the first stage, Kaufmann’s expertons method is used to reduce a possibly large number of applicants for credit. Using the combined expert data, the credit risk level is determined for each project. Only the projects with low risks are selected. In the second stage, the model of refined decisions is constructed using the new modification of the previously proposed possibilistic discrimination analysis method (Sirbiladze, Khutsisvili, & Dvalishvili, 2010). This stage is based on expert knowledge and experience. The projects selected in the first stage are compared in order to identify high-quality ones among them. The possibility levels of experts’ preferences are calculated and the projects are ranked. Finally, the third stage deals with the bicriteria discrete optimization problem whose solution makes it possible to arrange the most advantageous investment in several projects simultaneously. The decision on funding the selected projects is made and an optimal distribution of the allocated investment amount among them is provided. The efficiency of the proposed methodology is illustrated by an example.