Expected value multiobjective portfolio rebalancing model with fuzzy parameters

Pankaj Gupta, Garima Mittal and Mukesh Kumar Mehlawat

Insurance: Mathematics and Economics, 2013, vol. 52, issue 2, 190-203

Abstract: In this paper we develop a multicriteria credibilistic framework for portfolio rebalancing. We use an expected value model with fuzzy parameters considering return, risk and liquidity as key financial criteria. The transaction costs are assumed to be paid on the basis of incremental discounts and are adjusted in the net return of the portfolio. A solution procedure based on fuzzy goal programming and a hybrid intelligent algorithm that combines fuzzy simulation with a real-coded genetic algorithm is presented to solve the portfolio rebalancing problem. The approach adopted here has the advantage of handling the multicriteria portfolio rebalancing problem where the fuzzy parameters are characterized by general functional forms. An empirical study is included to demonstrate the effectiveness of the solution approach and efficiency of the model in practical applications of rebalancing an existing portfolio.

Keywords: Fuzzy portfolio rebalancing; Transaction costs; Expected value model; Multiobjective programming; Real-coded genetic algorithm (search for similar items in EconPapers)
JEL-codes: C61 C63 D81 G11 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:52:y:2013:i:2:p:190-203

DOI: 10.1016/j.insmatheco.2012.12.002

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