An Interval-Valued Fuzzy Portfolio Decision Model with Entropy and VaR Constraints

Qiansheng Zhang^1, and Yuanjun Ou¹

¹School of Mathematics and Statistics, Guangdong University of Foreign Studies, Guangzhou, China

Cite this paper:
Qiansheng Zhang and Yuanjun Ou. An Interval-Valued Fuzzy Portfolio Decision Model with Entropy and VaR Constraints. American Journal of Modeling and Optimization. 2024; 11(1):1-6. doi: 10.12691/ajmo-11-1-1

Abstract

To deal with portfolio problem with interval-valued fuzzy return, this paper firstly employs interval-valued fuzzy possibilistic variance and information entropy to measure the risk and dispersion of portfolio, and uses value-at-risk (VaR) to measure the maximum loss under a given confidence level. Then an interval-valued fuzzy portfolio decision model is constructed with information entropy and VaR constraints. Secondly, we convert the uncertain risk objective function of portfolio model into a simple quadratic function and obtain the optimal portfolio strategy by LINGO optimization software. Finally, the effectiveness of the proposed portfolio decision model is empirically analyzed through real stock investment data, and the impacts of different entropy and VaR on portfolio strategies are tested.

Keywords:
interval-valued fuzzy number possibilistic variance value-at-risk entropy portfolio

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