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Capital rationing problems under uncertainty and risk

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Abstract

Capital rationing is a major problem in managerial decision making. The classical mathematical formulation of the problem relies on a multi-dimensional knapsack model with known input parameters. Since capital rationing is carried out in conditions where uncertainty is the rule rather than the exception, the hypothesis of deterministic data limits the applicability of deterministic formulations in real settings. This paper proposes a stochastic version of the capital rationing problem which explicitly accounts for uncertainty. In particular, a mathematical formulation is provided in the framework of stochastic programming with joint probabilistic constraints and a novel solution approach is proposed. The basic model is also extended to include specific risk measures. Preliminary computational results are presented and discussed.

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Authors and Affiliations

  1. Dipartimento di Elettronica, Informatica, Sistemistica, Università della Calabria, Via P. Bucci 41C, 87030, Rende (Cosenza), Italy

    Patrizia Beraldi, Maria Elena Bruni & Antonio Violi

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  1. Patrizia Beraldi
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  2. Maria Elena Bruni
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  3. Antonio Violi
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Correspondence to Patrizia Beraldi.

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Beraldi, P., Bruni, M.E. & Violi, A. Capital rationing problems under uncertainty and risk. Comput Optim Appl 51, 1375–1396 (2012). https://doi.org/10.1007/s10589-010-9390-y

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