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Effectiveness of securities with fuzzy probabilistic return

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  • Krzysztof M. Piasecki

Abstract

The generalized fuzzy present value of a security is defined here as fuzzy valued utility of cash flow. The generalized fuzzy present value cannot depend on the value of future cash flow. There ex- ists such a generalized fuzzy present value which is not a fuzzy present value in the sense given by some authors. If the present value is a fuzzy number and the future value is a random one, then the re- turn rate is given as a probabilistic fuzzy subset on a real line. This kind of return rate is called a fuzzy probabilistic return. The main goal of this paper is to derive the family of effective securities with fuzzy probabilistic return. Achieving this goal requires the study of the basic parameters characteriz- ing fuzzy probabilistic return. Therefore, fuzzy expected value and variance are determined for this case of return. These results are a starting point for constructing a three-dimensional image. The set of effective securities is introduced as the Pareto optimal set determined by the maximization of the ex- pected return rate and minimization of the variance. Finally, the set of effective securities is distin- guished as a fuzzy set. These results are obtained without the assumption that the distribution of fu- ture values is Gaussian.

Suggested Citation

  • Krzysztof M. Piasecki, 2011. "Effectiveness of securities with fuzzy probabilistic return," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 21(2), pages 65-78.
    • Handle: RePEc:wut:journl:v:2:y:2011:p:65-78:id:183
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    References listed on IDEAS

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    Cited by:

    1. Krzysztof Piasecki, 2012. "The basis of financial arithmetic from the viewpoint of utility theory," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 22(3), pages 37-53.
    2. repec:wut:journl:v:3:y:2012:id:1044 is not listed on IDEAS
    3. Anna Łyczkowska-Hanćkowiak, 2019. "Sharpe’s Ratio for Oriented Fuzzy Discount Factor," Mathematics, MDPI, vol. 7(3), pages 1-16, March.
    4. Krzysztof Piasecki & Joanna Siwek, 2018. "The portfolio problem with present value modelled by a discrete trapezoidal fuzzy number," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 28(1), pages 57-74.

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