Belief rule-based system for portfolio optimisation with nonlinear cash-flows and constraints

Yu-Wang Chen, Ser-Huang Poon, Jian-Bo Yang, Dong-Ling Xu, Dongxu Zhang and Simon Acomb

European Journal of Operational Research, 2012, vol. 223, issue 3, 775-784

Abstract: A belief rule-based (BRB) system is a generic nonlinear modelling and inference scheme. It is based on the concept of belief structures and evidential reasoning (ER), and has been shown to be capable of capturing complicated nonlinear causal relationships between antecedent attributes and consequents. The aim of this paper is to develop a BRB system that complements the RiskMetrics WealthBench system for portfolio optimisation with nonlinear cash-flows and constraints. Two optimisation methods are presented to locate efficient portfolios under different constraints specified by the investors. Numerical studies demonstrate the effectiveness and efficiency of the proposed methodology.

Keywords: Portfolio optimisation; Efficient frontier; Belief rule base; Evidential reasoning (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:223:y:2012:i:3:p:775-784

DOI: 10.1016/j.ejor.2012.07.008

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