FUZZY PROGRAMMING APPROACH FOR PORTFOLIO OPTIMIZATION

M. M. Nasrabadi, M. A. Yaghoobi and M. Mashinchi

Received September 17, 2009

Abstract

Nowadays, industrial companies are frequently faced with the problem of where the capital should be spent and which combination of projects should be selected from several possible project mixes. Traditional methods of portfolio selection, that is how to select a combination of possible projects, are index-ranking and linear programming. In recent years, we have been able to observe that these methods are insufficient, particularly in long-term programming. The nature of real-world problems requires taking into account uncertainty of the input data and it is very difficult to clearly know all information in deterministic parameters. In this paper, we consider the problem of portfolio selection in an oil and gas company to motivate our study. We model this problem as a stochastic programming problem and develop a fuzzy programming approach for solving such a problem.

Keywords and phrases: portfolio selection, stochastic programming, fuzzy programming.