Modeling of linear uncertain portfolio selection with uncertain constraint and risk index

Weiwei Guo (), Wei-Guo Zhang () and Zaiwu Gong ()
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Weiwei Guo: Nanjing University of Information Science and Technology
Wei-Guo Zhang: Shenzhen University
Zaiwu Gong: Nanjing University of Information Science and Technology

Fuzzy Optimization and Decision Making, 2024, vol. 23, issue 3, No 7, 469-496

Abstract: Abstract Since securities market is subject to a great deal of uncertainty and complexity, the return of securities cannot be accurately estimated by historical data. In this case, it must use experts’ knowledge and judgment. Therefore, we investigate portfolio selection problems in such uncertain environments. First, this paper regards the rate of return on security as an uncertain variable which obeys linear uncertainty distribution, and then provides the analytical expressions of the corresponding risk, return and risk index in the uncertain portfolio selection environment. Afterwards, we construct three types uncertain portfolio selection models with uncertain constraint, namely, the minimizing risk, the maximizing return and the maximizing belief degree. Meanwhile, in order to more intuitively reflect the investor’s sense of loss, three types uncertain portfolio selection models considering both uncertain constraint and risk index are also constructed. These models are transformed into corresponding deterministic models. Finally, through an example analysis, this paper obtains the portfolio selection strategies under different objectives, compares the results under different models, and analyzes the sensitivity of the parameters.

Keywords: Portfolio selection; Uncertain variable; Uncertain constraint; Risk index (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10700-024-09429-7

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