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Stochastic programming technique for portfolio optimization with minimax risk and bounded parameters

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Abstract

In this paper a portfolio optimization problem with bounded parameters is proposed taking into consideration the minimax risk measure, in which liquidity of the stocks is allied with selection of the portfolio. Interval uncertainty of the model is dealt with through a fusion between interval and random variable. As a result of this, the interval inequalities are converted to chance constraints. A solution methodology is developed using this concept to obtain an efficient portfolio. The theoretical developments are illustrated on a large data set taken from National Stock Exchange, India.

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Acknowledgements

The authors would like to thank the referees for their comments and suggestions that led the paper into the current form.

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Authors and Affiliations

  1. Department of Mathematics, SRM Institute of Science and Technology, Chennai, India

    P Kumar

  2. Department of Mathematics, Indian Institute of Technology, Kharagpur, India

    G Panda & U C Gupta

Authors
  1. P Kumar
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  2. G Panda
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  3. U C Gupta
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Corresponding author

Correspondence to G Panda.

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Kumar, P., Panda, G. & Gupta, U.C. Stochastic programming technique for portfolio optimization with minimax risk and bounded parameters. Sādhanā 43, 149 (2018). https://doi.org/10.1007/s12046-018-0902-2

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  • DOI: https://doi.org/10.1007/s12046-018-0902-2

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