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Risk aversion and Investment Consider an investor who has available the sum of $15,000 for investment, and is considering investing in stocks X1, X2, and X3. The prices of these stocks during the last 12 months are provided in the table below. The investor also has an option of keeping the money and not investing (Cash). The objective is to maximize net profits (revenues minus costs). Month 1 2 3 4 5 6 7 8 9 10 11 12 X1 40 42 44 40 46 48 50 41 48 38 40 40 X2 120 118 120 116 122 115 123 124 117 119 118 116 X3 60 61 58 52 54 49 55 37 38 40 39 45 The prices (these are not net returns) shown are the closing prices on the last business day of each month. Assume that you are currently in the end of month 12. i.e. purchasing prices for stocks are those of month 12. For risk aversion coefficient assume the values of 0, 0.0005, 0.0006, 0.0007, 0.0008, 0.0009, 0.001, 0.002, 0.01, 0.2,0.3 1. Turn in the mathematical formulation of this problem . Carefully, cleanly, and clearly define all your sets and variables.

Operation Management, Management Studies

  • Category:- Operation Management
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