An Uncertain Mean-AVaR Portfolio Selection via an Artificial Neural Network Scheme

Fatemeh Talebi (), Alireza Nazemi and Abdolmajid Abdolbaghi Ataabadi ()
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Fatemeh Talebi: Faculty of Mathematical Sciences, Shahrood University of Technology, Shahrood, 3619995161-316, Iran
Alireza Nazemi: Faculty of Mathematical Sciences, Shahrood University of Technology, Shahrood, 3619995161-316, Iran
Abdolmajid Abdolbaghi Ataabadi: Department of Management, Faculty of Industrial Engineering and Management, Shahrood University of Technology, Shahrood, 3619995161-316, Iran

International Journal of Information Technology & Decision Making (IJITDM), 2024, vol. 23, issue 02, 783-823

Abstract: This paper focuses on the computation issue of portfolio optimization with scenario-based mean-average value at Risk (AVaR) in uncertain environment. The portfolio optimization problem is designed in two cases: risk-taker and risk-averse models. The main idea is to replace the portfolio selection models with linear programming (LP) problems. Since the computing time required for solving LP greatly depends on the dimension and the structure of the problem, the conventional numerical methods are usually less effective in real-time applications. One promising approach to handle online applications is to employ recurrent neural networks based on circuit implementation. Hence, according to the convex optimization theory and some concepts of ordinary differential equations, a neural network model for solving the LP problems related to portfolio selection problems is presented. The equilibrium point of the proposed model is proved to be equivalent to the optimal solution of the original problem. It is also shown that the proposed neural network model is stable in the sense of Lyapunov and it is globally convergent to an exact optimal solution of the portfolio selection problem with uncertain returns. Some illustrative examples are provided to show the feasibility and the efficiency of the proposed method in this paper.

Keywords: Uncertain variables; portfolio selection; average value at risk; crisp equivalent programming; neural network; stability; convergent (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S0219622023500128

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