Possibility theory for multiobjective fuzzy random portfolio optimization

• Main Authors: Mir Ehsan Hesam Sadati, Ali Doniavi, Abbas Samadi
• Format: Article
• Language: English
• Published: Growing Science 2014-06-01
• Series: Decision Science Letters
• Subjects: Multi-objective portfolio optimization model; Possibility and Necessity-based model; Fuzzy random variables
• Online Access: http://www.growingscience.com/dsl/Vol3/dsl_2014_14.pdf

The problem of portfolio optimization is a standard problem in financial world and it has received tremendous attentions. Portfolio optimization plays essential role in determining portfolio strategies for investors. Portfolio optimization is intrinsically a discrete optimization problem whose decision criteria are in conflict and the proposed study of this paper considers a portfolio optimization problem involving fuzzy random variables. To solve the proposed model, we first present the possibility and necessity-based model to reformulate the fuzzy random portfolio selection model into linear programming models and using the resulted linear programs, a multi-objective problem is constructed. To solve the multi-objective problem we propose some methods to consider decision makers’ optimistic and pessimistic views. A numerical example illustrates the whole idea on multiobjective fuzzy random portfolio optimization by possibility and necessity-based model.