Search results for "Efficient frontier"
showing 8 items of 18 documents
Portfolio optimization using a credibility mean-absolute semi-deviation model
2015
We present a cardinality constrained credibility mean-absolute semi-deviation model.We prove relationships for possibility and credibility moments for LR-fuzzy variables.The return on a given portfolio is modeled by means of LR-type fuzzy variables.We solve the portfolio selection problem using an evolutionary procedure with a DSS.We select best portfolio from Pareto-front with a ranking strategy based on Fuzzy VaR. We introduce a cardinality constrained multi-objective optimization problem for generating efficient portfolios within a fuzzy mean-absolute deviation framework. We assume that the return on a given portfolio is modeled by means of LR-type fuzzy variables, whose credibility dist…
Portfolios with fuzzy returns: Selection strategies based on semi-infinite programming
2008
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.
On the Computation of the Efficient Frontier of the Portfolio Selection Problem
2012
An easy-to-use procedure is presented for improving theε-constraint method for computing the efficient frontier of the portfolio selection problem endowed with additional cardinality and semicontinuous variable constraints. The proposed method provides not only a numerical plotting of the frontier but also an analytical description of it, including the explicit equations of the arcs of parabola it comprises and the change points between them. This information is useful for performing a sensitivity analysis as well as for providing additional criteria to the investor in order to select an efficient portfolio. Computational results are provided to test the efficiency of the algorithm and to i…
Fuzzy portfolio selection based on the analysis of efficient frontiers
2011
We present an algorithm for analyzing the geometry of the efficient frontier of the portfolio selection problem with semicontinuous variable and cardinality constraints, and use it as a basis to solve a fuzzy version of the problem, designed to obtain efficient portfolios, in the Markowitz's sense, for which the trade-off between expected return and assumed risk fits better the investor's subjective criteria. We illustrate our proposal with an example solved with LINGO and Mathematica.
Observations Regarding Choice Behaviour in Interactive Multiple Criteria Decision-Making Environments: An Experimental Investigation
1989
Many interactive procedures have been developed for solving optimization problems having multiple criteria. In such procedures, an exploration over the feasible or efficient region is conducted for locating the most preferred solution. As Steuer (1986) notes, interactive procedures are characterized by phases of decision-making alternating with phases of computation. Generally a pattern is established that we keep repeating until termination. At each iteration, a solution, or group of solutions, is generated for a decision-maker’s (DM’s) examination. Based on the examination, the DM inputs information to the solution procedure in the form of tradeoffs, pairwise comparisons, aspiration level…
Distance Measures for Portfolio Selection
2017
The classical Markowitz approach to the portfolio selection problem (PSP) consists of selecting the portfolio that minimises the return variance for a given level of expected return. By solving the problem for different values of this expected return we obtain the Pareto efficient frontier, which is composed of non-dominated portfolios. The final user has to discriminate amongst these points by resorting to an external criterion in order to decide which portfolio to invest in. We propose to define an external portfolio that corresponds to a desired criterion, and to assess its distance from the Markowitz frontier in market allowing for short-sellings or not. We show that this distance is ab…
Soft Computing Techniques for Portfolio Selection: Combining SRI with Mean-Variance Goals
2014
A fuzzy portfolio selection model is presented incorporating a socially responsible goal without discarding a priori financially good portfolios or weakening a priori the financial goals. Hence, the optimal portfolios it provides could be either efficient from the strictly financial point of view or non-efficient if leaving the efficient frontier substantially improves the degree of social responsibility. The model can be used to direct heuristic procedures in order to select a reduced number of various alternatives from which the investor can directly make a final decision.
Calibration of optimal execution of financial transactions in the presence of transient market impact
2012
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution strategy strongly depends on a careful modeling of market impact, i.e. how the price reacts to trades. In this paper we consider a recently introduced market impact model (Bouchaud et al., 2004), which has the property of describing both the volume and the temporal dependence of price change due to trading. We show how this model can be used to describe price impact also in aggregated trade time or in real time. We then solve analytically and calibrate wit…