A Fuzzy Portfolio Selection Methodology Under Investing Constraints

It is well-known that the financial market is affected by many non-probabilistic factors. In a fuzzy uncertain economic environment, the future states of returns and risks of risky assets cannot be predicted accurately. Based on this fact, possibilistic portfolio selection problem under investing constrains is discussed in this paper. The possibilistic mean value of the return is termed measure of investment return and the possibilistic variance of the return is termed measure of investment risk. We further present a quadratic programming model replaced Markowitz’s mean-variance model when returns of assets are trapezoidal fuzzy numbers, the conventional probabilistic mean-variance model is simplified and extended. A numerical example of a possibilistic fuzzy portfolio selection problem is given to illustrate our proposed effective means and approaches.