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Fuzzy portfolio optimization model under real constraints

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  • Liu, Yong-Jun
  • Zhang, Wei-Guo

Abstract

This paper discusses a multi-objective portfolio optimization problem for practical portfolio selection in fuzzy environment, in which the return rates and the turnover rates are characterized by fuzzy variables. Based on the possibility theory, fuzzy return and liquidity are quantified by possibilistic mean, and market risk and liquidity risk are measured by lower possibilistic semivariance. Then, two possibilistic mean–semivariance models with real constraints are proposed. To solve the proposed models, a fuzzy multi-objective programming technique is utilized to transform them into corresponding single-objective models and then a genetic algorithm is designed for solution. Finally, a numerical example is given to illustrate the application of our models. Comparative results show that the designed algorithm is effective for solving the proposed models.

Suggested Citation

  • Liu, Yong-Jun & Zhang, Wei-Guo, 2013. "Fuzzy portfolio optimization model under real constraints," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 704-711.
  • Handle: RePEc:eee:insuma:v:53:y:2013:i:3:p:704-711
    DOI: 10.1016/j.insmatheco.2013.09.005
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    References listed on IDEAS

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    1. Giove, Silvio & Funari, Stefania & Nardelli, Carla, 2006. "An interval portfolio selection problem based on regret function," European Journal of Operational Research, Elsevier, vol. 170(1), pages 253-264, April.
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    5. Zhang, Wei-Guo & Liu, Yong-Jun & Xu, Wei-Jun, 2012. "A possibilistic mean-semivariance-entropy model for multi-period portfolio selection with transaction costs," European Journal of Operational Research, Elsevier, vol. 222(2), pages 341-349.
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    Cited by:

    1. repec:spr:annopr:v:272:y:2019:i:1:d:10.1007_s10479-018-2876-1 is not listed on IDEAS
    2. Dobrislav Dobrev∗ & Travis D. Nesmith & Dong Hwan Oh, 2017. "Accurate Evaluation of Expected Shortfall for Linear Portfolios with Elliptically Distributed Risk Factors," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 10(1), pages 1-14, February.
    3. repec:wsi:ijitdm:v:17:y:2018:i:03:n:s0219622018500190 is not listed on IDEAS
    4. repec:kap:compec:v:53:y:2019:i:4:d:10.1007_s10614-018-9833-6 is not listed on IDEAS
    5. repec:spr:annopr:v:269:y:2018:i:1:d:10.1007_s10479-017-2411-9 is not listed on IDEAS
    6. Liu, Yong-Jun & Zhang, Wei-Guo, 2015. "A multi-period fuzzy portfolio optimization model with minimum transaction lots," European Journal of Operational Research, Elsevier, vol. 242(3), pages 933-941.
    7. repec:wut:journl:v:1:y:2018:p:57-74:id:1346 is not listed on IDEAS
    8. repec:spr:annopr:v:269:y:2018:i:1:d:10.1007_s10479-016-2365-3 is not listed on IDEAS

    More about this item

    Keywords

    Portfolio selection; Fuzzy number; Real constraints; Multi-objective optimization; Genetic algorithm;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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