An approach to the integral optimization of investment portfolios
A comprehensive approach to the optimization of financial portfolios is provided by the Integral Analysis Method (IAM), which comprises four steps: The description of the problem is followed by three mathematical steps, namely, cardinal analysis, ordinal analysis and integration analysis, which allo...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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Elsevier
2024-03-01
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| Series: | Journal of Open Innovation: Technology, Market and Complexity |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2199853124000295 |
| _version_ | 1797217121007042560 |
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| author | Rafael Guillermo García-Cáceres Franklin Ignacio Páez-Rivera Bernarda Aldana-Gómez Ernesto Acosta-Gempeler John Wilmer Escobar-Velásquez |
| author_facet | Rafael Guillermo García-Cáceres Franklin Ignacio Páez-Rivera Bernarda Aldana-Gómez Ernesto Acosta-Gempeler John Wilmer Escobar-Velásquez |
| author_sort | Rafael Guillermo García-Cáceres |
| collection | DOAJ |
| description | A comprehensive approach to the optimization of financial portfolios is provided by the Integral Analysis Method (IAM), which comprises four steps: The description of the problem is followed by three mathematical steps, namely, cardinal analysis, ordinal analysis and integration analysis, which allow simultaneously involving ordinal and cardinal variables in an optimization problem. The cardinal analysis uses the L_1 risk model, which is enriched by the inclusion of a stochastic constraint on the successful performance forecast attributed to each of the shares that make up the investment portfolio. This bound, however, does not alter the linear nature of the model. The Ordinal analysis includes expert opinions on the reputation of each company as a qualitative criterion. This completes two of the most relevant aspects of the investment portfolio optimization problem: success probability (assessed through the cardinal analysis) and business reputation (assessed through the ordinal analysis). By resorting to Stochastic Multicriteria Acceptability Analysis, the integration analysis allows obtaining indicators that jointly evaluate the variables resulting from the two previous analyses. As a validation process, IAM was applied to simulated data. |
| first_indexed | 2024-03-07T15:46:44Z |
| format | Article |
| id | doaj.art-ac05870ce86946a6a2c898216439b1ec |
| institution | Directory Open Access Journal |
| issn | 2199-8531 |
| language | English |
| last_indexed | 2024-04-24T11:56:49Z |
| publishDate | 2024-03-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Journal of Open Innovation: Technology, Market and Complexity |
| spelling | doaj.art-ac05870ce86946a6a2c898216439b1ec2024-04-09T04:13:01ZengElsevierJournal of Open Innovation: Technology, Market and Complexity2199-85312024-03-01101100235An approach to the integral optimization of investment portfoliosRafael Guillermo García-Cáceres0Franklin Ignacio Páez-Rivera1Bernarda Aldana-Gómez2Ernesto Acosta-Gempeler3John Wilmer Escobar-Velásquez4School of Industrial Engineering, Universidad Pedagógica y Tecnológica de Colombia - UPTC, Sogamoso, Colombia; Corresponding author.Industrial Engineering, Pontificia Universidad Javeriana, Bogotá, ColombiaEscuela Colombiana de Ingeniería Julio Garavito, Bogotá, ColombiaEscuela Colombiana de Ingeniería Julio Garavito, Bogotá, ColombiaAccounting and Finance Department, Universidad del Valle, Bogotá, ColombiaA comprehensive approach to the optimization of financial portfolios is provided by the Integral Analysis Method (IAM), which comprises four steps: The description of the problem is followed by three mathematical steps, namely, cardinal analysis, ordinal analysis and integration analysis, which allow simultaneously involving ordinal and cardinal variables in an optimization problem. The cardinal analysis uses the L_1 risk model, which is enriched by the inclusion of a stochastic constraint on the successful performance forecast attributed to each of the shares that make up the investment portfolio. This bound, however, does not alter the linear nature of the model. The Ordinal analysis includes expert opinions on the reputation of each company as a qualitative criterion. This completes two of the most relevant aspects of the investment portfolio optimization problem: success probability (assessed through the cardinal analysis) and business reputation (assessed through the ordinal analysis). By resorting to Stochastic Multicriteria Acceptability Analysis, the integration analysis allows obtaining indicators that jointly evaluate the variables resulting from the two previous analyses. As a validation process, IAM was applied to simulated data.http://www.sciencedirect.com/science/article/pii/S2199853124000295Investment PortfolioProfitability of an Investment PortfolioRisk of an Investment PortfolioMinimum Expected Profitability RateIntegral Analysis MethodIntegral optimization |
| spellingShingle | Rafael Guillermo García-Cáceres Franklin Ignacio Páez-Rivera Bernarda Aldana-Gómez Ernesto Acosta-Gempeler John Wilmer Escobar-Velásquez An approach to the integral optimization of investment portfolios Journal of Open Innovation: Technology, Market and Complexity Investment Portfolio Profitability of an Investment Portfolio Risk of an Investment Portfolio Minimum Expected Profitability Rate Integral Analysis Method Integral optimization |
| title | An approach to the integral optimization of investment portfolios |
| title_full | An approach to the integral optimization of investment portfolios |
| title_fullStr | An approach to the integral optimization of investment portfolios |
| title_full_unstemmed | An approach to the integral optimization of investment portfolios |
| title_short | An approach to the integral optimization of investment portfolios |
| title_sort | approach to the integral optimization of investment portfolios |
| topic | Investment Portfolio Profitability of an Investment Portfolio Risk of an Investment Portfolio Minimum Expected Profitability Rate Integral Analysis Method Integral optimization |
| url | http://www.sciencedirect.com/science/article/pii/S2199853124000295 |
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