Abstract
This paper studies the problem of neutrosophic portfolios of financial assets as part of the modern portfolio theory. Neutrosophic portfolios comprise those categories of portfolios made up of financial assets for which the neutrosophic return, risk and covariance can be determined and which provide concomitant information regarding the probability of achieving the neutrosophic return, both at each financial asset and portfolio level and also information on the probability of manifestation of the neutrosophic risk. Neutrosophic portfolios are characterized by two fundamental performance indicators, namely: the neutrosophic portfolio return and the neutrosophic portfolio risk. Neutrosophic portfolio return is dependent on the weight of the financial assets in the total value of the portfolio but also on the specific neutrosophic return of each financial asset category that enters into the portfolio structure. The neutrosophic portfolio risk is dependent on the weight of the financial assets that enter the portfolio structure but also on the individual risk of each financial asset. Within this scientific paper was studied the minimum neutrosophic risk at the portfolio level, respectively, to establish what should be the weight that the financial assets must hold in the total value of the portfolio so that the risk is minimum. These financial assets weights, after calculations, were found to be dependent on the individual risk of each financial asset but also on the covariance between two financial assets that enter into the portfolio structure. The problem of the minimum risk that characterizes the neutrosophic portfolios is of interest for the financial market investors. Thus, the neutrosophic portfolios provide complete information about the probabilities of achieving the neutrosophic portfolio return but also of risk manifestation probability. In this context, the innovative character of the paper is determined by the use of the neutrosophic triangular fuzzy numbers and by the specific concepts of financial assets, in order to substantiating the decisions on the financial markets.
Highlights
The portfolios of financial assets have been the subject of numerous researches in the specialized literature, the main concern of the specialists being to identify a solution for the portfolio risk management, known being the fact that the capital market can generate huge losses if no solution is identified against the losses generated by the manifestation of the financial risk
Modelling the financial performance indicators taking into account the probabilities of their achievement; Clustering, respectively, modelling the value of financial performance indicators using the linguistic values that characterize the recorded values; Funding the investment decisions on the capital market by selecting value ranges and probabilities of achieving the financial performance indicators desired by investors; In order to complete the modelling of financial performance indicators with the help of fuzzy neutrosophic numbers, the present paper bases two fundamental concepts in the portfolio theory literature, namely: it introduces a new category of portfolios, respectively the neutrosophic portfolios of financial assets and bases the algorithm for minimizing the risk of the neutrosophic portfolio of financial assets
Financial assets A1 and A2, which measures the intensity of the links between the neutrosophic returns specific to the two financial assets
Summary
The portfolios of financial assets have been the subject of numerous researches in the specialized literature, the main concern of the specialists being to identify a solution for the portfolio risk management, known being the fact that the capital market can generate huge losses if no solution is identified against the losses generated by the manifestation of the financial risk. Modelling the financial performance indicators taking into account the probabilities of their achievement; Clustering, respectively, modelling the value of financial performance indicators using the linguistic values that characterize the recorded values; Funding the investment decisions on the capital market by selecting value ranges and probabilities of achieving the financial performance indicators desired by investors; In order to complete the modelling of financial performance indicators with the help of fuzzy neutrosophic numbers, the present paper bases two fundamental concepts in the portfolio theory literature, namely: it introduces a new category of portfolios, respectively the neutrosophic portfolios of financial assets and bases the algorithm for minimizing the risk of the neutrosophic portfolio of financial assets.
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