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Fuzzy Portfolio Selection Including Cardinality Constraints and Integer Conditions

Author

Listed:
  • Clara Calvo

    (Universitat de València)

  • Carlos Ivorra

    (Universitat de València)

  • Vicente Liern

    (Universitat de València)

Abstract

This paper is concerned with a fuzzy version of the portfolio selection problem, which includes diversification conditions and incorporates investor’s subjective preferences. The inclusion of diversification conditions leads to mixed-integer models, which are computationally demanding. On the other hand, the consideration of integer conditions makes the solution very sensitive to investor’s subjective preferences with regard to the trade-off between risk and expected return. These preferences are imprecise by their very nature. In this paper, we overcome these issues by proposing a solution method for a fuzzy quadratic portfolio selection model with integer conditions. The suitability of the proposed method is illustrated by means of two numerical examples.

Suggested Citation

  • Clara Calvo & Carlos Ivorra & Vicente Liern, 2016. "Fuzzy Portfolio Selection Including Cardinality Constraints and Integer Conditions," Journal of Optimization Theory and Applications, Springer, vol. 170(1), pages 343-355, July.
    • Handle: RePEc:spr:joptap:v:170:y:2016:i:1:d:10.1007_s10957-016-0902-5
    DOI: 10.1007/s10957-016-0902-5
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    References listed on IDEAS

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    1. Leon, T. & Liern, V. & Vercher, E., 2002. "Viability of infeasible portfolio selection problems: A fuzzy approach," European Journal of Operational Research, Elsevier, vol. 139(1), pages 178-189, May.
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    Cited by:

    1. Wulan Anggraeni & Sudradjat Supian & Sukono & Nurfadhlina Abdul Halim, 2023. "Catastrophe Bond Diversification Strategy Using Probabilistic–Possibilistic Bijective Transformation and Credibility Measures in Fuzzy Environment," Mathematics, MDPI, vol. 11(16), pages 1-30, August.

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