Robust-based interactive portfolio selection problems with an uncertainty set of returns

Takashi Hasuike, Hideki Katagiri

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)

Abstract

This paper considers a robust portfolio selection problem with an uncertainty set of future returns and satisfaction levels in terms of the total return and robustness parameter. Since the proposed model is formulated as an ill-defined problem due to uncertainty and is bi-objective, that is, to maximize both the abovementioned satisfaction levels, it is difficult to solve the model directly without introducing some criterion of optimality for the bi-objective functions. Therefore, by introducing fuzzy goals and an interactive fuzzy satisficing method, the proposed model is transformed into a deterministic equivalent problem. Furthermore, to obtain the exact optimal portfolio analytically, a solution method is developed by introducing the auxiliary problem and performing equivalent transformations. In order to compare the proposed model with previous useful models, numerical examples are provided, and the results show that it is important to maximize the robustness parameter and total return using the interactive process for adjusting investor's satisfaction levels.

Original languageEnglish
Pages (from-to)263-288
Number of pages26
JournalFuzzy Optimization and Decision Making
Volume12
Issue number3
DOIs
Publication statusPublished - 2013 Sep 1
Externally publishedYes

Keywords

  • Fuzzy goal
  • Interactive fuzzy satisficing method
  • Portfolio selection problem
  • Robust programming
  • Uncertainty set

ASJC Scopus subject areas

  • Software
  • Logic
  • Artificial Intelligence

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