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Solving mean-VaR portfolio selection model with interval-typed random parameter using interval analysis

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Abstract

Portfolio optimization encompasses the optimal assignment of limited capital to different available financial assets to achieve a reasonable trade-off between profit and risk. This paper focuses on a portfolio selection model with interval-typed random parameters considering risk measures as value-at-risk (VaR). The value-at-risk is expressed by means of the interval-typed of random parameters and associated with Markowitz’s model. The purpose of this opinion is to design an interval mean-VaR portfolio optimization model with the objective of minimization of VaR. A methodology is developed to obtain an efficient investment strategy using interval analysis with the parametric representation of the interval. The theoretical developments are illustrated based on a historical data set taken from the National Stock Exchange, India.

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Acknowledgements

The authors would like to thanks 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, Kattankulathur, Chennai, 603203, India

    P. Kumar & Jyotirmayee Behera

  2. VIT Bhopal University, Bhopal-Indore Highway, Kothrikalan, Sehore, Madhya Pradesh, 66114, India

    A. K. Bhurjee

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  1. P. Kumar
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Kumar, P., Behera, J. & Bhurjee, A.K. Solving mean-VaR portfolio selection model with interval-typed random parameter using interval analysis. OPSEARCH 59, 41–77 (2022). https://doi.org/10.1007/s12597-021-00531-7

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