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Fuzzy Portfolio Selection Problem with Different Borrowing and Lending Rates

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  • Wei Chen
  • Yiping Yang
  • Hui Ma

Abstract

As we know, borrowing and lending risk-free assets arise extensively in the theory and practice of finance. However, little study has ever investigated them in fuzzy portfolio problem. In this paper, the returns of each assets are assumed to be fuzzy variables, then following the mean-variance approach, a new possibilistic portfolio selection model with different interest rates for borrowing and lending is proposed, in which the possibilistic semiabsolute deviation of the return is used to measure investment risk. The conventional probabilistic mean variance model can be transformed to a linear programming problem under possibility distributions. Finally, a numerical example is given to illustrate the modeling idea and the impact of borrowing and lending on optimal decision making.

Suggested Citation

  • Wei Chen & Yiping Yang & Hui Ma, 2011. "Fuzzy Portfolio Selection Problem with Different Borrowing and Lending Rates," Mathematical Problems in Engineering, Hindawi, vol. 2011, pages 1-15, July.
    • Handle: RePEc:hin:jnlmpe:263240
    DOI: 10.1155/2011/263240
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    Cited by:

    1. Deng, Xue & Chen, Jiaxing & Wang, Xu & Geng, Fengting, 2022. "Non-dominated sorting genetic algorithm-II for possibilistic mean-semiabsolute deviation-Yager entropy portfolio model with complex real-world constraints," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 202(C), pages 59-78.
    2. Akhilesh KUMAR & Mohammad SHAHID, 2021. "Portfolio selection problem: Issues, challenges and future prospectus," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(629), W), pages 71-90, Winter.

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