On the sensitivity of some portfolio optimization models using interval analysis

Sarishti Singh () and Geetanjali Panda ()
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Sarishti Singh: Indian Institute of Technology Kharagpur
Geetanjali Panda: Indian Institute of Technology Kharagpur

OPSEARCH, 2025, vol. 62, issue 1, No 4, 77-103

Abstract: Abstract In this paper, the performance of the optimal portfolio is studied when the portfolio optimization model is sensitive towards the expected rate of return of the assets. It is justified that any perturbation in the expected return within some bounds provide the decision maker with a set of choices of the optimal portfolio yielding portfolio risk within a range. Due to the perturbation in the parameters, the structure of the portfolio optimization models changes, and the classical approaches for solving these models are not suitable. Here, we represent these models with varying parameters as a system of interval equations and develop a methodology to obtain the set of all possible choices of the optimal portfolio of each model.

Keywords: Portfolio selection; Sensitivity analysis; Interval analysis; Interval linear equations; 90-08; 15A06; 15B99; 91G10; 65G40 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s12597-024-00787-9

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