Setting Up the Amateur Portfolio Problem

As mentioned in the Evergreen Research Post, I have been thinking about how to incorporate decisions made in international free agency to the domestic amateur draft and vice versa. For me, the best way to solve this problem is to make a toy model portfolio, comparing the different possible portfolios and run simulations. Then, we can compare and contrast the risk profiles of each, and determine which one is best. In my opinion, there's no optimal way to do this, and depends on where the team is at. If the major league team is bad and the minor league system is a mess, you may have a higher appetite for risk to get a superstar. If the major league team is good and you want to build depth, having a portfolio geared more towards college performers might make sense.

Below, I am going to define what makes a "safe" or "risky" portfolio for both domestic and international classes.

Domestic

For our domestic portfolio, I only want to consider the first 3 rounds. This is where most of the WAR from a given draft class comes from.

A "safe" portfolio is one where the team only selects college players, and a "risky" portfolio is one where the team only selects high schoolers. I understand that there are higher floor high schoolers and toolsy low floor college guys, but for sake of simplicity I want to keep it at this.

International

It's obvious but all sixteen year olds are risky, so I am defining the "safe" portfolio to be one where the team spreads its signing bonus pool over 5 fringy players, and the "risky" portfolio to be one where the teams spreads its bonus pool over 2 good players. I think these definitions accurately describe what most teams end up doing.