Interval-valued upside potential and downside risk portfolio optimisation

Massimiliano Kaucic and Roberto Daris

Economic Research-Ekonomska Istraživanja, 2017, vol. 30, issue 1, 1406-1426

Abstract: A novel interval optimisation approach is developed to include imprecise forecasts into the portfolio selection process for investors measuring upside potential and downside risk as deviations from a target return. Crisp scenarios are substituted by interval scenarios and the resulting interval optimisation problem is solved in a tractable manner by means of a bi-objective formulation exploiting a partial order relation between intervals. Four utility case studies involving assets from the F.T.S.E. M.I.B. Index are considered to illustrate how impreciseness can be efficiently handled in portfolio management.

Date: 2017
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DOI: 10.1080/1331677X.2017.1340180

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