A hybrid FA–SA algorithm for fuzzy portfolio selection with transaction costs

Wei Chen (), Yun Wang () and Mukesh Kumar Mehlawat ()
Additional contact information
Wei Chen: Capital University of Economics and Business
Yun Wang: Capital University of Economics and Business
Mukesh Kumar Mehlawat: University of Delhi

Annals of Operations Research, 2018, vol. 269, issue 1, No 8, 129-147

Abstract: Abstract Based on possibility theory, this paper deals with the portfolio adjusting problem for an existing portfolio under the assumption that the returns of risky assets are fuzzy numbers and there exists transaction costs in portfolio adjusting process. We propose a possibilistic mean-semi-absolute deviation portfolio model with V-shaped transaction costs, which are associated with a shift from the current portfolio to an adjusted one. In the proposed model, we take the possibilistic mean of the return as the investment return and possibilistic semi-absolute deviation of the return as the investment risk. To solve the proposed portfolio problem, a hybrid technique named as FA–SA algorithm combining firefly algorithm (FA) and simulated annealing algorithm (SA) is developed by taking the advantage of both FA and SA. In this algorithm, FA operates in the direction of enhancing the exploitation ability while SA improves the exploration using the lévy flight. Finally, a numerical example is given to demonstrate the effectiveness of the proposed model and the hybrid algorithm.

Keywords: Portfolio rebalancing; Possibility theory; Fuzzy variables; Transaction costs; Firefly algorithm; Simulated annealing algorithm (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10479-016-2365-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:annopr:v:269:y:2018:i:1:d:10.1007_s10479-016-2365-3

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10479

DOI: 10.1007/s10479-016-2365-3

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().