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Farm Portfolio Problem: Part III
Lecture XIV
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Target MOTAD
•
The target MOTAD model is a twoattribute
risk and return model.
–
Return is measured as the sum of the expected
return of each activity multiplied by the activity
level.
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–
Risk is measured as the expected sum of the
negative deviations of the solution results from
a targetreturn level.
–
Risk is then varied parametrically so that a risk
return frontier can be traced out.
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•
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
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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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–
In direct expected utility maximization the level
of wealth transferred to the objective function
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This note was uploaded on 07/15/2011 for the course AEB 6182 taught by Professor Weldon during the Fall '08 term at University of Florida.
 Fall '08
 Weldon

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