How the Investor’s Risk Preferences Influence the Optimal Allocation in a Credibilistic Portfolio Problem
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Journal of Systems Science and Information  2019, Vol. 7 Issue (4): 317-329    DOI: 10.21078/JSSI-2019-317-13
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How the Investor’s Risk Preferences Influence the Optimal Allocation in a Credibilistic Portfolio Problem
Irina GEORGESCU1, Jani KINNUNEN2
1. Department of Economic Cybernetics, Academy of Economic Studies, Bucharest, Romania;
2. Abo Akademi University, Tuomiokirkkotori 3, Turku 20500, Finland
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Abstract 

A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and how, combined with the utility function defines a notion of expected utility. In this paper the risk is a fuzzy variable and the notion of expected utility is defined in the setting of Liu's credibility theory. Thus, the portfolio choice problem is formulated as an optimization problem in which the objective function is a credibilistic expected utility. Different approximation calculation formulas for the optimal allocation of the credibilistic risky asset are proved. These formulas contain two types of parameters:Various credibilistic moments associated with fuzzy variables (expected value, variance, skewness and kurtosis) and the risk aversion, prudence and temperance indicators of the utility function.

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Articles by authors
Irina GEORGESCU
Jani KINNUNEN
Key wordsprudence   temperance   credibilistic expected utility     
Received: 2019-01-26;
Corresponding Authors: Irina GEORGESCU,E-mail:irina.georgescu@csie.ase.ro   
 E-mail: irina.georgescu@csie.ase.ro
About author: Jani KINNUNEN,E-mail:jani.kinnunen@abo.fi
Cite this article:   
Irina GEORGESCU,Jani KINNUNEN. How the Investor’s Risk Preferences Influence the Optimal Allocation in a Credibilistic Portfolio Problem[J]. Journal of Systems Science and Information, 2019, 7(4): 317-329.
URL:  
http://123.57.41.99/Jwk_si/EN/10.21078/JSSI-2019-317-13     or     http://123.57.41.99/Jwk_si/EN/Y2019/V7/I4/317
 
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