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Lecture14-2004

# Lecture14-2004 - Farm Portfolio Problem Part III Lecture...

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Farm Portfolio Problem: Part III Lecture XIV

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Fall 2004 2 Target MOTAD The target MOTAD model is a two-attribute risk and return model. Return is measured as the sum of the expected return of each activity multiplied by the activity level.
Fall 2004 3 Risk is measured as the expected sum of the negative deviations of the solution results from a target-return level. Risk is then varied parametrically so that a risk- return frontier can be traced out.

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Fall 2004 4 Mathematically, the model is stated as max ( ) x j j j n ij j j n i rj j j n r r r r n E z c x st a x b T c x y p y = - - = = = = = 1 1 1 1 0 λ
Fall 2004 5 Discrete Sequential Stochastic Programming Target MOTAD, direct expected utility, and even MOTAD begin to develop the concept of constraints being stochastic or met with some level of probability. In target MOTAD, income under a certain state exceeds the target level of income with some probability.

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Fall 2004 6 In direct expected utility maximization the level of wealth transferred to the objective function
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