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http://dx.doi.org/10.5302/J.ICROS.2006.12.12.1169

The Optimization of the Production Ratio by the Mean-variance Analysis of the Chemical Products Prices  

Park, Jeong-Ho (한국과학기술원 생명화학공학과)
Park, Sun-Won (한국과학기술원 생명화학공학과)
Publication Information
Journal of Institute of Control, Robotics and Systems / v.12, no.12, 2006 , pp. 1169-1172 More about this Journal
Abstract
The prices of chemical products are fluctuated by several factors. The chemical companies can't predict and be ready to all of these changes, so they are exposed to the risk of a profit fluctuation. But they can reduce this risk by making a well-diversified product portfolio. This problem can be thought as the optimization of the product portfolio. We assume that the profits come from the 'spread' between a naphtha and a chemical product. We calculate a mean and a variation of each spread and develop an automatic module to calculate the optimal portion of each product. The theory is based on the Markowitz portfolio management. It maximizes the expected return while minimizing the volatility. At last we draw an investment selection curve to compare each alternative and to demonstrate the superiority. And we suggest that an investment selection curve can be a decision-making tool.
Keywords
chemical product; Markowitz model; portfolio optimization; diversification; risk reduction;
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  • Reference
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