A risk tolerance model for portfolio adjusting problem with transaction costs based on possibilistic moments

Wei-Guo Zhang, Xi-Li Zhang and Wei-Jun Xu

Insurance: Mathematics and Economics, 2010, vol. 46, issue 3, 493-499

Abstract: Due to changes of situation in financial markets and investors' preferences towards risk, an existing portfolio may not be efficient after a period of time. In this paper, we propose a possibilistic risk tolerance model for the portfolio adjusting problem based on possibility moments theory. A Sequential Minimal Optimization (SMO)-type decomposition method is developed for finding exact optimal portfolio policy without extra matrix storage. We present a simple method to estimate the possibility distributions for the returns of assets. A numerical example is provided to illustrate the effectiveness of the proposed models and approaches.

Keywords: Portfolio; adjusting; Possibilistic; moment; Transaction; costs; SMO-type; decomposition; method (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:46:y:2010:i:3:p:493-499

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