A modified mean-variance-conditional value at risk model of multi-objective portfolio optimization with an application in finance

This research focuses on the development of a portfolio optimization model based on the classic optimization method and a meta-heuristic algorithm. The main goal of a portfolio optimization model is to achieve maximum return with minimum investment risk by allocating capital based on a set of existi...

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Main Author:	Elahi, Younes
Format:	Thesis
Language:	English
Published:	2014
Subjects:	QA Mathematics
Online Access:	http://eprints.utm.my/id/eprint/78634/1/YounesElahiPFS2014.pdf
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spelling	my-utm-ep.786342018-08-29T07:53:13Z A modified mean-variance-conditional value at risk model of multi-objective portfolio optimization with an application in finance 2014-12 Elahi, Younes QA Mathematics This research focuses on the development of a portfolio optimization model based on the classic optimization method and a meta-heuristic algorithm. The main goal of a portfolio optimization model is to achieve maximum return with minimum investment risk by allocating capital based on a set of existing assets. Recently, mean-variance models have been improved to mean-variance-CVaR (MVC) model as a multi-objective portfolio optimization (MPO) problem which is difficult to be solved directly and optimally. In this work, a modified MVC model of portfolio optimization is constructed using the weighted sum method (WSM). In this method, each objective function of MVC model is given a weight. The optimization problem is then minimized as a weighted sum of the objective functions. The implementation of WSM enables the MVC model to be transformed from a multi-objective function to one with a single objective function. The modified MVC model is then solved using ant colony optimization (ACO) algorithm. This algorithm solves the MVC model by the number of ant colonies and the number of pheromone, a chemical creating trails for others to follow. The modified MVC model can be used in managing diverse investment portfolio, including stocks on the stock market and currency exchange. The applicability and effectiveness of the proposed method are demonstrated by solving a benchmark problem and a practical investment problem as examples. The data of practical examples are collected from the foreign currency exchange of Bank Negara Malaysia for the years 2012 and 2013. In conclusion, this thesis presented a hybrid optimization algorithm which utilizes a classical approach, WSM and a meta-heuristic approach, ACO to solve an MVC model of portfolio optimization. 2014-12 Thesis http://eprints.utm.my/id/eprint/78634/ http://eprints.utm.my/id/eprint/78634/1/YounesElahiPFS2014.pdf application/pdf en public http://dms.library.utm.my:8080/vital/access/manager/Repository/vital:98457 phd doctoral Universiti Teknologi Malaysia, Faculty of Science Faculty of Science
institution	Universiti Teknologi Malaysia
collection	UTM Institutional Repository
language	English
topic	QA Mathematics
spellingShingle	QA Mathematics Elahi, Younes A modified mean-variance-conditional value at risk model of multi-objective portfolio optimization with an application in finance
description	This research focuses on the development of a portfolio optimization model based on the classic optimization method and a meta-heuristic algorithm. The main goal of a portfolio optimization model is to achieve maximum return with minimum investment risk by allocating capital based on a set of existing assets. Recently, mean-variance models have been improved to mean-variance-CVaR (MVC) model as a multi-objective portfolio optimization (MPO) problem which is difficult to be solved directly and optimally. In this work, a modified MVC model of portfolio optimization is constructed using the weighted sum method (WSM). In this method, each objective function of MVC model is given a weight. The optimization problem is then minimized as a weighted sum of the objective functions. The implementation of WSM enables the MVC model to be transformed from a multi-objective function to one with a single objective function. The modified MVC model is then solved using ant colony optimization (ACO) algorithm. This algorithm solves the MVC model by the number of ant colonies and the number of pheromone, a chemical creating trails for others to follow. The modified MVC model can be used in managing diverse investment portfolio, including stocks on the stock market and currency exchange. The applicability and effectiveness of the proposed method are demonstrated by solving a benchmark problem and a practical investment problem as examples. The data of practical examples are collected from the foreign currency exchange of Bank Negara Malaysia for the years 2012 and 2013. In conclusion, this thesis presented a hybrid optimization algorithm which utilizes a classical approach, WSM and a meta-heuristic approach, ACO to solve an MVC model of portfolio optimization.
format	Thesis
qualification_name	Doctor of Philosophy (PhD.)
qualification_level	Doctorate
author	Elahi, Younes
author_facet	Elahi, Younes
author_sort	Elahi, Younes
title	A modified mean-variance-conditional value at risk model of multi-objective portfolio optimization with an application in finance
title_short	A modified mean-variance-conditional value at risk model of multi-objective portfolio optimization with an application in finance
title_full	A modified mean-variance-conditional value at risk model of multi-objective portfolio optimization with an application in finance
title_fullStr	A modified mean-variance-conditional value at risk model of multi-objective portfolio optimization with an application in finance
title_full_unstemmed	A modified mean-variance-conditional value at risk model of multi-objective portfolio optimization with an application in finance
title_sort	modified mean-variance-conditional value at risk model of multi-objective portfolio optimization with an application in finance
granting_institution	Universiti Teknologi Malaysia, Faculty of Science
granting_department	Faculty of Science
publishDate	2014
url	http://eprints.utm.my/id/eprint/78634/1/YounesElahiPFS2014.pdf
_version_	1747818033692278784

A modified mean-variance-conditional value at risk model of multi-objective portfolio optimization with an application in finance

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