A parametric Sharpe ratio optimization approach for fuzzy portfolio selection problem

DOI10.1155/2017/6279859MaRDI QIDQ1992962zbMATH OpenOpenAlexWikidataFDO

Authors Ying Liu, Yanan Li

Publication date 5 November 2018

Published in Mathematical Problems in Engineering (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.1155/2017/6279859

Mathematics Subject Classification ID

Fuzzy and other nonstochastic uncertainty mathematical programming (90C70) Portfolio theory (91G10)

Review text

Summary: When facing to make a portfolio decision, investors may care more about every portfolio's performance on a return and risk trade-off. In this paper, a new low partial moment measurement that only punishes the loss risk is defined for selection variables based on L-S integral. Furthermore, a new performance measure for portfolio evaluation is proposed to generalize the Sharpe ratio in the fuzzy context. With the optimal performance criterion, a new parametric Sharpe ratio portfolio optimization model is developed wherein uncertain returns are presented as parametric interval-valued fuzzy variables. To make the proposed model easy to solve, we transform the fractional programming into an equivalent form and solve it with domain decomposition method (DDM). Finally, we apply the proposed performance measure into a portfolio selection problem, compare the computational results in different cases, and analyze the influence of different parameters on the optimal portfolio.

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Cited in

(2)

• Efficient portfolio for interval Sharpe ratio model
• Uncertain portfolio selection with borrowing constraint and background risk

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