Portfolio Optimization Model with and without Options under Additional Constraints

Portfolio Optimization Model with and without Options under Additional Constraints

In this paper, first, we study mean-absolute deviation (MAD) portfolio optimization model with cardinality constraints, short selling, and risk-neutral interest rate. Then, in order to insure the investment against unfavorable outcomes, an extension of MAD model that includes options is considered....

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Main Authors: T. Khodamoradi, M. Salahi, Ali Reza Najafi
Format: Article
Language:English
Published: Hindawi Limited 2020-01-01
Series:Mathematical Problems in Engineering
Online Access:http://dx.doi.org/10.1155/2020/8862435
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spelling doaj-459efb9062a640ca978e7869a96bb7422020-12-07T09:08:28ZengHindawi LimitedMathematical Problems in Engineering1024-123X1563-51472020-01-01202010.1155/2020/88624358862435Portfolio Optimization Model with and without Options under Additional ConstraintsT. Khodamoradi0M. Salahi1Ali Reza Najafi2Department of Applied Mathematics, Faculty of Mathematical Sciences, University of Guilan, Rasht, IranDepartment of Applied Mathematics, Faculty of Mathematical Sciences, University of Guilan, Rasht, IranDepartment of Applied Mathematics, Faculty of Mathematical Sciences, University of Guilan, Rasht, IranIn this paper, first, we study mean-absolute deviation (MAD) portfolio optimization model with cardinality constraints, short selling, and risk-neutral interest rate. Then, in order to insure the investment against unfavorable outcomes, an extension of MAD model that includes options is considered. Moreover, since the data in financial models usually involve uncertainties, we apply robust optimization to the MAD model with options. Finally, a data set of S&P index is used to compare the effectiveness of options in the models in terms of returns and Sharpe ratios.http://dx.doi.org/10.1155/2020/8862435
collection DOAJ
language English
format Article
sources DOAJ
author T. Khodamoradi
M. Salahi
Ali Reza Najafi
spellingShingle T. Khodamoradi
M. Salahi
Ali Reza Najafi
Portfolio Optimization Model with and without Options under Additional Constraints
Mathematical Problems in Engineering
author_facet T. Khodamoradi
M. Salahi
Ali Reza Najafi
author_sort T. Khodamoradi
title Portfolio Optimization Model with and without Options under Additional Constraints
title_short Portfolio Optimization Model with and without Options under Additional Constraints
title_full Portfolio Optimization Model with and without Options under Additional Constraints
title_fullStr Portfolio Optimization Model with and without Options under Additional Constraints
title_full_unstemmed Portfolio Optimization Model with and without Options under Additional Constraints
title_sort portfolio optimization model with and without options under additional constraints
publisher Hindawi Limited
series Mathematical Problems in Engineering
issn 1024-123X
1563-5147
publishDate 2020-01-01
description In this paper, first, we study mean-absolute deviation (MAD) portfolio optimization model with cardinality constraints, short selling, and risk-neutral interest rate. Then, in order to insure the investment against unfavorable outcomes, an extension of MAD model that includes options is considered. Moreover, since the data in financial models usually involve uncertainties, we apply robust optimization to the MAD model with options. Finally, a data set of S&P index is used to compare the effectiveness of options in the models in terms of returns and Sharpe ratios.
url http://dx.doi.org/10.1155/2020/8862435
work_keys_str_mv AT tkhodamoradi portfoliooptimizationmodelwithandwithoutoptionsunderadditionalconstraints
AT msalahi portfoliooptimizationmodelwithandwithoutoptionsunderadditionalconstraints
AT alirezanajafi portfoliooptimizationmodelwithandwithoutoptionsunderadditionalconstraints
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