6533b86ffe1ef96bd12cdd41

RESEARCH PRODUCT

Portfolios with fuzzy returns: Selection strategies based on semi-infinite programming

Enriqueta Vercher

subject

Mathematical optimizationApplied MathematicsMathematics::Optimization and ControlEfficient frontierPortfolio selection problemSortino ratioFuzzy mathematical programmingRate of return on a portfolioComputational MathematicsDownside risk functionFuzzy returnsComputer Science::Computational Engineering Finance and ScienceReplicating portfolioCapital asset pricing modelPortfolioPortfolio optimizationSemi-infinite programmingModern portfolio theoryMathematics

description

AbstractThis paper provides new models for portfolio selection in which the returns on securities are considered fuzzy numbers rather than random variables. The investor's problem is to find the portfolio that minimizes the risk of achieving a return that is not less than the return of a riskless asset. The corresponding optimal portfolio is derived using semi-infinite programming in a soft framework. The return on each asset and their membership functions are described using historical data. The investment risk is approximated by mean intervals which evaluate the downside risk for a given fuzzy portfolio. This approach is illustrated with a numerical example.

yearjournalcountryeditionlanguage
2008-08-01Journal of Computational and Applied Mathematics
10.1016/j.cam.2007.02.017http://dx.doi.org/10.1016/j.cam.2007.02.017