Fuzzy Portfolio Model with Transaction Cost Based on Downside Risk Measure

Abstract

In this paper the problem of portfolio selection with transaction cost based on downside risk measure is discussed. Left-right-type fuzzy number is used to describe the expected return rate of security, and transaction cost and diversification condition are incorporated into the process of portfolio selection. We evaluate the expected return and risk by interval-valued mean, regard the downside risk as the portfolio risk, and formulate the portfolio selection problem as a linear programming. Finally, a numerical example is presented to illustrate the efficiency of the proposed model.