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A Class of Chance Constrained Multi-objective Portfolio Selection Model Under Fuzzy Random Environment

Author

Listed:
  • Jiuping Xu

    (Sichuan University)

  • Xiaoyang Zhou

    (Sichuan University)

  • Steven Li

    (University of South Australia)

Abstract

This paper deals with a class of chance constrained portfolio selection problems in the fuzzy random decision making system. An integrated fuzzy random portfolio selection model with a chance constraint is proposed on the basis of the mean-variance model and the safety-first model. According to different definitions of chance, we consider two types of fuzzy random portfolio selection models: one is for the optimistic investors and the other is for the pessimistic investors. In order to deal with the fuzzy random models, we develop a few theorems on the variances of fuzzy random returns and the equivalent partitions of two types of chance constraints. We then transform the fuzzy random portfolio selection models into their equivalent crisp models. We further employ the ε-constraint method to obtain the efficient frontier. Finally, we apply the proposed models and approaches to the Chinese stock market as an illustration.

Suggested Citation

  • Jiuping Xu & Xiaoyang Zhou & Steven Li, 2011. "A Class of Chance Constrained Multi-objective Portfolio Selection Model Under Fuzzy Random Environment," Journal of Optimization Theory and Applications, Springer, vol. 150(3), pages 530-552, September.
    • Handle: RePEc:spr:joptap:v:150:y:2011:i:3:d:10.1007_s10957-011-9852-0
    DOI: 10.1007/s10957-011-9852-0
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    References listed on IDEAS

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    1. Srichander Ramaswamy, 1998. "Portfolio selection using fuzzy decision theory," BIS Working Papers 59, Bank for International Settlements.
    2. W. Briec & K. Kerstens & J. B. Lesourd, 2004. "Single-Period Markowitz Portfolio Selection, Performance Gauging, and Duality: A Variation on the Luenberger Shortage Function," Journal of Optimization Theory and Applications, Springer, vol. 120(1), pages 1-27, January.
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    5. M. J. Best & J. Hlouskova, 2007. "An Algorithm for Portfolio Optimization with Variable Transaction Costs, Part 2: Computational Analysis," Journal of Optimization Theory and Applications, Springer, vol. 135(3), pages 531-547, December.
    6. Z. F. Li & H. Yang & X. T. Deng, 2007. "Optimal Dynamic Portfolio Selection with Earnings-at-Risk," Journal of Optimization Theory and Applications, Springer, vol. 132(3), pages 459-473, March.
    7. Lester G. Telser, 1955. "Safety First and Hedging," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 23(1), pages 1-16.
    8. Li, Jun & Xu, Jiuping, 2009. "A novel portfolio selection model in a hybrid uncertain environment," Omega, Elsevier, vol. 37(2), pages 439-449, April.
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    Cited by:

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    2. Meryem Masmoudi & Fouad Ben Abdelaziz, 2018. "Portfolio selection problem: a review of deterministic and stochastic multiple objective programming models," Annals of Operations Research, Springer, vol. 267(1), pages 335-352, August.

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