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Fuzzy Portfolio Selection Including Cardinality Constraints and Integer Conditions

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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.

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Authors and Affiliations

  1. Universitat de València, Valencia, Spain

    Clara Calvo, Carlos Ivorra & Vicente Liern

Authors
  1. Clara Calvo
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  2. Carlos Ivorra
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  3. Vicente Liern
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Correspondence to Vicente Liern.

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Communicated by Moawia Alghalith.

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Calvo, C., Ivorra, C. & Liern, V. Fuzzy Portfolio Selection Including Cardinality Constraints and Integer Conditions. J Optim Theory Appl 170, 343–355 (2016). https://doi.org/10.1007/s10957-016-0902-5

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  • DOI: https://doi.org/10.1007/s10957-016-0902-5

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