An interactive approach to stochastic programming-based portfolio optimization

Murat Köksalan () and Ceren Tuncer Şakar ()
Additional contact information
Murat Köksalan: Hacettepe University
Ceren Tuncer Şakar: Hacettepe University

Annals of Operations Research, 2016, vol. 245, issue 1, No 4, 47-66

Abstract: Abstract We consider expected return, Conditional Value at Risk, and liquidity criteria in a multi-period portfolio optimization setting modeled by stochastic programming. We aim to identify a preferred solution of the decision maker (DM) by obtaining information on her/his preferences. We use a weighted Tchebycheff program to generate representative sets of solutions. Our approach models the stochasticity of market movements by stochastic programming. Working with multiple scenario trees, we construct confidence ellipsoids around representative solutions, and present them to the DM for her/him to make a choice. With each iteration of the approach, an increasingly concentrated set of ellipsoids around the DM’s choices are generated. The procedure is demonstrated with tests performed using stocks traded on Borsa Istanbul.

Keywords: Portfolio optimization; Stochastic programming; Interactive weighted Tchebycheff procedure (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://link.springer.com/10.1007/s10479-014-1719-y 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:245:y:2016:i:1:d:10.1007_s10479-014-1719-y

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

DOI: 10.1007/s10479-014-1719-y

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 ().