Multi-period fuzzy portfolio optimization model subject to real constraints

Abstract

In this paper we examine a multi-period portfolio optimization problem in a fuzzy environment. The proposed optimization model is subject to CVaR constraint, transaction constraint and cardinality constraint. The returns of the assets are assumed to be trapezoidal fuzzy variables and therefore the portfolio retun and risk are quantified by the possibilistic mean and semivariance of the fuzzy returns respectively. A dynamic programming method is used to solve the proposed mixed interger optimization model for different cardinality constraints. A numerical study based on real stocks market data is provided to test the efficiency of the proposed algorithm. The sensitivity of the optimal portfolio investment strategies is tested for different confidence levels for the CVaR constraint.