Rasearch On Efficient Cost-Return-Risk Management

This thesis studies the efficient management of research and development projects, from project selection and valuation of projects to life-long management of the projects.At the stage of project selection, we first review the classical Markowitz mean-variance model and point out its shortcomings. For the application in engineering we study the optimization problem for portfolio selection under the probabilistic constraints, which is also called the safety first principal. This means to maximize the probability of return above the expected return. We provide a new simplified approach to derive the analytic solution of this model and obtain the analytic solution. We also show the efficiency of this method by numerical simulation based on the real data.For the valuation of the R&D project, we first review the methods called Net Present Value (NPV) and Expected NPV applied in the certain and uncertain cases respectively. Then we review the modern method called real option developed on the base of financial option. We discussed various applications of real option theory in valuation of R&D projects. It is shown via numerical example that the NPV and ENPV often under estimate the value of R&D project, while the real option method provide more reasonable pricing.We discuss in detail the dynamic risk-return management for R&D project. After introducing the life cycle risk and cost management we study the dynamic matrix management, i.e., between different levels the matrix networking management mode can be used. This mode combines the major vertical line and minor horizontal line. Along the time line the continuously dynamic management can be performed. At each stage both qualitative and quantitative analysis should be used. So, at each stage of R&D project the technique management as well as project management should be enhanced, including continuous cost and risk management. Some real examples are used to show how to perform the qualitative and quantitative analysis for risk-cost management of R&D project.Finally we summarize the main work of this thesis and conclude with the discussion for possible future research topics.