Fuzzy-portfolio-selection models with value-at-risk

Bo Wang, Shuming Wang, Junzo Watada

    Research output: Contribution to journalArticle

    65 Citations (Scopus)

    Abstract

    Based on fuzzy value-at-risk (VaR), this paper proposes a new portfolio-selection model (PSM) called the VaR-based fuzzy PSM (VaR-FPSM). Compared with the existing FPSMs, the VaR can directly reflect the greatest loss of a selected case under a given confidence level. In this study, when the security returns are taken as trapezoidal, triangular, and Gaussian fuzzy numbers, several crisp equivalent models of the VaR-FPSM are derived, which can be handled by any linear programming solvers. In general situations, an improved particle swarm optimization algorithm on the basis of fuzzy simulation is designed to search for the approximate optimal solutions. To illustrate the proposed model and the behavior of the improved particle swarm optimization algorithm, two numerical examples are provided, and the results are discussed. Furthermore, the proposed algorithm is compared with some existing approaches to fuzzy portfolio selection, such as the genetic algorithm and simulated annealing.

    Original languageEnglish
    Article number5752840
    Pages (from-to)758-769
    Number of pages12
    JournalIEEE Transactions on Fuzzy Systems
    Volume19
    Issue number4
    DOIs
    Publication statusPublished - 2011 Aug

    Fingerprint

    Value at Risk
    Selection Model
    Portfolio Selection
    Particle Swarm Optimization Algorithm
    Particle swarm optimization (PSO)
    Fuzzy Simulation
    Confidence Level
    Fuzzy numbers
    Simulated annealing
    Simulated Annealing
    Linear programming
    Triangular
    Optimal Solution
    Genetic algorithms
    Genetic Algorithm
    Numerical Examples
    Model

    Keywords

    • Algorithm comparisons
    • fuzzy simulation
    • fuzzy value-at-risk (VaR)
    • fuzzy variable
    • fuzzy-portfolio-selection model (FPSM)
    • improved particle swarm optimization (IPSO)

    ASJC Scopus subject areas

    • Control and Systems Engineering
    • Artificial Intelligence
    • Computational Theory and Mathematics
    • Applied Mathematics

    Cite this

    Fuzzy-portfolio-selection models with value-at-risk. / Wang, Bo; Wang, Shuming; Watada, Junzo.

    In: IEEE Transactions on Fuzzy Systems, Vol. 19, No. 4, 5752840, 08.2011, p. 758-769.

    Research output: Contribution to journalArticle

    Wang, Bo ; Wang, Shuming ; Watada, Junzo. / Fuzzy-portfolio-selection models with value-at-risk. In: IEEE Transactions on Fuzzy Systems. 2011 ; Vol. 19, No. 4. pp. 758-769.
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