http://www.foliotechnologies.com/2009/05/25/what-efficient-frontier-are-you-talking-about/ Sat, 20 Jun 2009 16:54:46 +0000 http://wordpress.org/?v=2.9.2 hourly 1 http://www.foliotechnologies.com/2009/05/25/what-efficient-frontier-are-you-talking-about/comment-page-1/#comment-3 Hervé Kieffel Sat, 20 Jun 2009 16:54:46 +0000 http://www.foliotechnologies.com/?p=240#comment-3 Thanks for your comments. The question of convexity of the (Pareto-)efficient frontier is a complex one, for at least two reasons: 1) If the decision units are binary (the project is either funded, or it is not), the frontier will of course be a step-function. If you can fund .72 unit of project, though, the stepwise non-convexities will be removed, but you might still have the 2nd issue: 2) the knapsack problem: http://www.foliotechnologies.com/2009/05/03/ranking-vs-optimizing-projects/ Thanks for your comments. The question of convexity of the (Pareto-)efficient frontier is a complex one, for at least two reasons:
1) If the decision units are binary (the project is either funded, or it is not), the frontier will of course be a step-function. If you can fund .72 unit of project, though, the stepwise non-convexities will be removed, but you might still have the 2nd issue:
2) the knapsack problem: http://www.foliotechnologies.com/2009/05/03/ranking-vs-optimizing-projects/

]]> http://www.foliotechnologies.com/2009/05/25/what-efficient-frontier-are-you-talking-about/comment-page-1/#comment-2 rwoodaman Fri, 19 Jun 2009 01:44:45 +0000 http://www.foliotechnologies.com/?p=240#comment-2 Cool post. I very much enjoyed the explanation of the distinction between efficient horizons in finance in PPM. I deal in the PPM world for defense. There we will see some cases where the pareto efficient horizon is non-convex. We draw the frontier as if it were convex, leaving some of the non-dominated points below the convex horizon. While these are non-dominated, they don't make much sense to acquire. Cool post. I very much enjoyed the explanation of the distinction between efficient horizons in finance in PPM. I deal in the PPM world for defense. There we will see some cases where the pareto efficient horizon is non-convex. We draw the frontier as if it were convex, leaving some of the non-dominated points below the convex horizon. While these are non-dominated, they don’t make much sense to acquire.

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