
Multi-Period Mean-Absolute Deviation Fuzzy Portfolio Selection Model with Entropy Constraints
Peng ZHANG, Heshan GONG, Weiting LAN
Journal of Systems Science and Information ›› 2016, Vol. 4 ›› Issue (5) : 428-443.
Multi-Period Mean-Absolute Deviation Fuzzy Portfolio Selection Model with Entropy Constraints
This paper considers a multi-period fuzzy portfolio selection problem maximizing the terminal wealth imposed by risk control, in which the returns of assets are characterized by fuzzy numbers. A fuzzy absolute deviation is originally de ned as the risk control of portfolio. Entropy constraints and borrowing constraints are added in the portfolio selection model. Based on the theories of possibility measures, a new multi-period portfolio optimization model with transaction costs is proposed. And then, the proposed model is transformed into a crisp nonlinear programming problem by using fuzzy programming approach. Because of the transaction costs, the multi-period portfolio selection is the dynamic optimization problem with path dependence. Through changing the cost function into a variable, the multi-period portfolio selection is approximately turned into the dynamic programming. Furthermore, the discrete approximate iteration method is designed to obtain the optimal portfolio strategy. Finally, an example is given to illustrate the behavior of the proposed model and the designed algorithm using real data from the Shanghai Stock Exchange.
multi-period fuzzy portfolio selection / mean absolute deviation / transaction costs / entropy constraints / discrete approximate iteration method {{custom_keyword}} /
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Supported by the National Natural Science Foundation of China (71271161, 71301144)
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