Uncertain portfolio optimization problem with liquidity and
diversification
- Ranran Zhang
, - Bo Li
Ranran Zhang

Nanjing University of Finance and Economics - Xianlin Campus
Corresponding Author:zrrnufe@163.com
Author ProfileAbstract
This paper deals with a portfolio selection problem with uncertain
returns. Here, the returns of the assets are regarded as uncertain
variables which are estimated by experienced experts. First, an
uncertain mean-variance-entropy model for portfolio selection problem is
presented by taking into account four criteria viz., return, risk,
liquidity and diversification degree of portfolio. In the proposed
model, the investment return is quantified by uncertain expected value,
the investment risk is characterized by uncertain variance and entropy
is used to measure the diversification degree of portfolio. Moreover,
different from the previous bi-objective optimization model, our model
achieves both the maximum return and the minimum risk in a single
objective form by introducing a risk aversion factor and the dimensional
influence caused by different units is eliminated by normalization.
Then, two auxiliary portfolio selection models are transformed into
different equivalent deterministic models. Finally, a numerical
simulation is given to verify the practicability of our model.