Risk analysis software tutorial II: OptFolio - a simulation optimization system for project portfolio planning

OptFolio is a new portfolio optimization software system that simultaneously addresses financial return goals, catastrophic loss avoidance, and performance probability. The innovations embedded in the system enable users to confidently design effective plans for achieving financial goals, employing accurate analysis based on real data. Traditional analysis and prediction methods are based on mean variance analysis -- an approach known to be faulty. The new software system takes a much more sophisticated and strategic direction. State-of-the-art technology integrates simulation and metaheuristic optimization techniques and a new surface methodology based on linear programming into a global system that guides a series of evaluations to reveal truly optimal investment scenarios. In this paper we will present new techniques that increase the flexibility of optimization tools and deepen the types of portfolio analysis that can be carried out. We include examples applied to energy, pharmaceutical, and information technology portfolios.