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Fuzzy turnover rate chance constraints portfolio model

Research output: Contribution to journalJournal articlepeer-review

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  • Sasan Barak
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<mark>Journal publication date</mark>1/07/2013
<mark>Journal</mark>European Journal of Operational Research
Issue number1
Volume228
Pages (from-to)141-147
Publication StatusPublished
<mark>Original language</mark>English

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.