In this paper we propose a novel interval optimization approach for portfolio selection when imprecise forecasts are available. We consider investors acting their choices according to the prospect theory, where scenarios are provided in the form of approximate numbers. The resulting constrained nonlinear interval optimization problem is converted into two nonlinear programming problems using a total order relation between intervals. Static and dynamic analysis of portfolios involving assets from the Croatian market illustrate the potential of the method with respect to the standard procedure.

Prospect Theory Based Portfolio Optimization Problem with Imprecise Forecasts

KAUCIC, MASSIMILIANO;DARIS, ROBERTO
2016-01-01

Abstract

In this paper we propose a novel interval optimization approach for portfolio selection when imprecise forecasts are available. We consider investors acting their choices according to the prospect theory, where scenarios are provided in the form of approximate numbers. The resulting constrained nonlinear interval optimization problem is converted into two nonlinear programming problems using a total order relation between intervals. Static and dynamic analysis of portfolios involving assets from the Croatian market illustrate the potential of the method with respect to the standard procedure.
2016
http://www.fm-kp.si/zalozba/ISSN/1581-6311/14_359-384.pdf
File in questo prodotto:
File Dimensione Formato  
14_359-384.pdf

accesso aperto

Descrizione: Articolo principale
Tipologia: Documento in Versione Editoriale
Licenza: Creative commons
Dimensione 239.94 kB
Formato Adobe PDF
239.94 kB Adobe PDF Visualizza/Apri
Pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11368/2902343
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact