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A New Fuzzy Portfolio Model Based on Background Risk Using MCFOA

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Abstract

This paper proposes a new fuzzy model for portfolio selection problem, which takes into account the vagueness of the investor’s preferences. The model proposed in this paper also regards the elastic increment of decision-making risk, background risk, and other financial risks. In order to solve this model, we present a modified evolutionary algorithm called modified chaos fruit fly optimization algorithm, which is more adequate when a quick and efficient solution is needed. Numerical examples are given to illustrate the effect of the background risk on portfolio selection.

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Acknowledgments

The authors would like to acknowledge the support of National Natural Science Foundation of China (71171086), Guangdong Universities Humanities and Social Science Key Research Base Project (2012JDXM_0006), and NCET (10-0401).

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Authors and Affiliations

  1. School of Business Administration, Institute of Government Decision-making and Performance Evaluation, South China University of Technology, 381 Wushan Rd., Guangzhou, 510641, People’s Republic of China

    Weijun Xu

  2. School of Business Administration, South China University of Technology, 381 Wushan Rd., Guangzhou, 510641, People’s Republic of China

    Xiong Deng & Jia Li

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  1. Weijun Xu
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  2. Xiong Deng
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  3. Jia Li
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Correspondence to Weijun Xu.

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Xu, W., Deng, X. & Li, J. A New Fuzzy Portfolio Model Based on Background Risk Using MCFOA. Int. J. Fuzzy Syst. 17, 246–255 (2015). https://doi.org/10.1007/s40815-015-0017-4

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  • DOI: https://doi.org/10.1007/s40815-015-0017-4

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