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Belief rule-based system for portfolio optimisation with nonlinear cash-flows and constraints

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  • Chen, Yu-Wang
  • Poon, Ser-Huang
  • Yang, Jian-Bo
  • Xu, Dong-Ling
  • Zhang, Dongxu
  • Acomb, Simon

Abstract

A belief rule-based (BRB) system is a generic nonlinear modelling and inference scheme. It is based on the concept of belief structures and evidential reasoning (ER), and has been shown to be capable of capturing complicated nonlinear causal relationships between antecedent attributes and consequents. The aim of this paper is to develop a BRB system that complements the RiskMetrics WealthBench system for portfolio optimisation with nonlinear cash-flows and constraints. Two optimisation methods are presented to locate efficient portfolios under different constraints specified by the investors. Numerical studies demonstrate the effectiveness and efficiency of the proposed methodology.

Suggested Citation

  • Chen, Yu-Wang & Poon, Ser-Huang & Yang, Jian-Bo & Xu, Dong-Ling & Zhang, Dongxu & Acomb, Simon, 2012. "Belief rule-based system for portfolio optimisation with nonlinear cash-flows and constraints," European Journal of Operational Research, Elsevier, vol. 223(3), pages 775-784.
    • Handle: RePEc:eee:ejores:v:223:y:2012:i:3:p:775-784
    DOI: 10.1016/j.ejor.2012.07.008
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    Cited by:

    1. Hua Zhu & Jianbin Zhao & Yang Xu & Limin Du, 2016. "Interval-Valued Belief Rule Inference Methodology Based on Evidential Reasoning-IRIMER," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 15(06), pages 1345-1366, November.
    2. Vera Ivanyuk, 2022. "Proposed Model of a Dynamic Investment Portfolio with an Adaptive Strategy," Mathematics, MDPI, vol. 10(23), pages 1-19, November.

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