A practical R&D selection model using fuzzy pay-off method

  • Farhad HassanzadehEmail author
  • Mikael Collan
  • Mohammad Modarres


The aim of this paper is to develop a practical R&D portfolio selection model that addresses effective R&D project valuation issue, while it tackles R&D uncertainty in portfolio optimization. Fuzzy sets theory is employed to capture and model the inaccuracy in project information. To avoid the well-known complications of fuzzy real option valuation, the fuzzy pay-off method is used to more effectively value R&D projects. The resulting problem is formulated as a fuzzy zero–one integer programming model which is later transformed into a crisp mathematical formulation to solve the problem for various degrees of risk. A numerical example is used to illustrate the proposed approach.


R&D portfolio selection Fuzzy optimization Real option valuation Fuzzy pay-off method 


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Copyright information

© Springer-Verlag London Limited 2011

Authors and Affiliations

  • Farhad Hassanzadeh
    • 1
    Email author
  • Mikael Collan
    • 2
  • Mohammad Modarres
    • 1
  1. 1.Department of Industrial EngineeringSharif University of TechnologyTehranIran
  2. 2.Institute for Advanced Management Systems ResearchTurkuFinland

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