January 2020
analysis examined portfolio applications in more detail, looking at how military analysts model portfolio values, weight assessments, constraints and dependencies, and uncertainty and risk.
Within the military environment, Davendralingam and DeLaurentis (2015) looked at analyzing military capabilities as a system of systems (SoS) approach. According to the authors, this approach creates signifcant development challenges in terms of technical, operational, and programmatic dimensions. Tools for deciding how to form and evolve SoS that consider performance and risk are lacking. Their research leveraged tools from fnancial engineering and operations research perspectives in portfolio optimization to assist decision making within SoS. The authors recommended the use of more robust portfolio algorithms to address inherent real-world issues of data uncertainty, internodal performance, and developmental risk. A naval warfare situation was developed in the paper to model scenario applications to fnd portfolios of systems from a candidate list of available systems. Their results showhow the optimization framework effectively reduces the combinatorial complexity of trade- space exploration by allowing the optimization problem to handle the mathematically intensive aspects of the decision-making process. As a result, the authors concluded that human decision makers can be tasked to focus on choosing the appropriate weights for risk aversion in making fnal decisions rather than on the mathematical constructs of the portfolio. In contrast, when it comes to mathematical constructs, Sidiropoulos, Sidiropoulou, and Lalagas (2014) ran a portfolio management analysis with a focus on identifying and assessing current commercial of-the-shelf
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Defense ARJ, January 2020, Vol. 27No. 1 : 60-107
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