Portfolio Optimization for Defence Applications

Abstract

The problem of designing an effective future defense force is quite complex and challenging. One methodology that is often employed in this domain is portfolio optimization, whereby the objective is to select a diverse set of assets that maximize the return on investment. In the defense context, the return on investment is often measured in terms of the capabilities that the investments will provide. While the field of portfolio optimization is well established, applications in the defense sector pose unique challenges not seen in other application domains. However, the literature regarding portfolio optimization for defense applications is rather sparse. To this end, this paper provides a structured review of recent applications and identifies a number of areas that warrant further investigation.

Keywords

• Future force design
• portfolio optimization
• defense planning
• project selection
• project prioritization
• uncertainty