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Multicriteria decision systems for financial problems

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Abstract

Financial decision making is involved with a plethora of important issues for individual and institutional investors, managers of firms and organizations, as well as policy makers. The finance theory has adopted the wealth maximization principle, focusing on normative and descriptive approaches often highlighting multiple factors that drive this single goal. Multicriteria decision systems add important practical contributions in this context, supporting financial decision makers in modeling, analyzing, and evaluating multiple ways of action, under all decision criteria pertinent in a specific decision instance. This paper analyzes the relevance of multicriteria decision systems for financial decisions. A detailed discussion and up-to-date review on two important areas of financial decision support, namely portfolio selection and corporate performance evaluation, are also given to highlight how different multicriteria modeling approaches complement and enhance exiting techniques from the areas of finance and operations research.

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Notes

  1. The term “utility theory” is usually used in the context of decisions under uncertainty, whereas “value theory” is often preferred for deterministic problems. Having this distinction in mind, in order to simplify the presentation in the remainder of the paper we shall use the term “utility” to cover both situations.

  2. http://ussif.org/resources/sriguide/srifacts.cfm.

  3. Under the Basel accord, financial institutions that use more sophisticated, better calibrated, and more accurate quantitative scoring systems, have higher flexibility with respect to the minimum capital that they should hold as protection against negative events.

  4. In other specialized credit granting contexts (e.g., project finance), the risk assessment process is mostly based on empirical quantitative and qualitative models (Morton et al. 2011, Chaps. 8, 10), which fit well the context of MCDA.

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  1. Dept. of Production Engineering and Management, Financial Engineering Laboratory, Technical University of Crete, University Campus, 73100, Chania, Greece

    Constantin Zopounidis & Michael Doumpos

  2. School of Management, Audencia Group, Nantes, France

    Constantin Zopounidis

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Correspondence to Constantin Zopounidis.

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Zopounidis, C., Doumpos, M. Multicriteria decision systems for financial problems. TOP 21, 241–261 (2013). https://doi.org/10.1007/s11750-013-0279-7

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