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Fuzzy turnover rate chance constraints portfolio model

Fuzzy turnover rate chance constraints portfolio model
Fuzzy turnover rate chance constraints portfolio model
One concern of many investors is to own the assets which can be liquidated easily. Thus, in this paper, we incorporate portfolio liquidity in our proposed model. Liquidity is measured by an index called turnover rate. Since the return of an asset is uncertain, we present it as a trapezoidal fuzzy number and its turnover rate is measured by fuzzy credibility theory. The desired portfolio turnover rate is controlled through a fuzzy chance constraint. Furthermore, to manage the portfolios with asymmetric investment return, other than mean and variance, we also utilize the third central moment, the skewness of portfolio return. In fact, we propose a fuzzy portfolio mean-variance-skewness model with cardinality constraint which combines assets limitations with liquidity requirement. To solve the model, we also develop a hybrid algorithm which is the combination of cardinality constraint, genetic algorithm, and fuzzy simulation, called FCTPM.
Credibility measure, Finance, Genetic algorithm, Mean-variance-skewness model, Portfolio selection
0377-2217
141-147
Barak, Sasan
f82186de-f5b7-4224-9621-a00e7501f2c3
Abessi, Masoud
bfd99cff-cd84-49d9-bd87-d502e9df31b5
Modarres, Mohammad
9257a9b7-d05c-4d8f-81ab-64e23b7099ec
Barak, Sasan
f82186de-f5b7-4224-9621-a00e7501f2c3
Abessi, Masoud
bfd99cff-cd84-49d9-bd87-d502e9df31b5
Modarres, Mohammad
9257a9b7-d05c-4d8f-81ab-64e23b7099ec

Barak, Sasan, Abessi, Masoud and Modarres, Mohammad (2013) Fuzzy turnover rate chance constraints portfolio model. European Journal of Operational Research, 228 (1), 141-147. (doi:10.1016/j.ejor.2013.01.036).

Record type: Article

Abstract

One concern of many investors is to own the assets which can be liquidated easily. Thus, in this paper, we incorporate portfolio liquidity in our proposed model. Liquidity is measured by an index called turnover rate. Since the return of an asset is uncertain, we present it as a trapezoidal fuzzy number and its turnover rate is measured by fuzzy credibility theory. The desired portfolio turnover rate is controlled through a fuzzy chance constraint. Furthermore, to manage the portfolios with asymmetric investment return, other than mean and variance, we also utilize the third central moment, the skewness of portfolio return. In fact, we propose a fuzzy portfolio mean-variance-skewness model with cardinality constraint which combines assets limitations with liquidity requirement. To solve the model, we also develop a hybrid algorithm which is the combination of cardinality constraint, genetic algorithm, and fuzzy simulation, called FCTPM.

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More information

Accepted/In Press date: 21 January 2013
e-pub ahead of print date: 31 January 2013
Published date: 1 July 2013
Keywords: Credibility measure, Finance, Genetic algorithm, Mean-variance-skewness model, Portfolio selection

Identifiers

Local EPrints ID: 434605
URI: http://eprints.soton.ac.uk/id/eprint/434605
ISSN: 0377-2217
PURE UUID: f66f6794-a669-4560-a37a-0bfa8c6be51b
ORCID for Sasan Barak: ORCID iD orcid.org/0000-0001-7715-9958

Catalogue record

Date deposited: 03 Oct 2019 16:30
Last modified: 03 Dec 2019 01:20

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Contributors

Author: Sasan Barak ORCID iD
Author: Masoud Abessi
Author: Mohammad Modarres

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