Possibility theory for multiobjective fuzzy random portfolio optimization

• Published in: Decision Science Letters Vol. 3; no. 3; pp. 305 - 318
• Main Authors: Hesam Sadati, Mir Ehsan, Doniavi, Ali, Samadi, Abbas
• Format: Journal Article
• Language: English
• Published: Growing Science 2014
• Subjects: Fuzzy random variables; Multi-objective portfolio optimization model; Possibility and Necessity-based model
• ISSN: 1929-5804; 1929-5812
• DOI: 10.5267/j.dsl.2014.4.001

The problem of portfolio optimization is a standard problem in financial world and it has received tremendous attentions. Portfolio optimization plays essential role in determining portfolio strategies for investors. Portfolio optimization is intrinsically a discrete optimization problem whose decision criteria are in conflict and the proposed study of this paper considers a portfolio optimization problem involving fuzzy random variables. To solve the proposed model, we first present the possibility and necessity-based model to reformulate the fuzzy random portfolio selection model into linear programming models and using the resulted linear programs, a multi-objective problem is constructed. To solve the multi-objective problem we propose some methods to consider decision makers’ optimistic and pessimistic views. A numerical example illustrates the whole idea on multiobjective fuzzy random portfolio optimization by possibility and necessity-based model.