Abstract
The purpose of this paper was to model, with the help of neutrosophic fuzzy numbers, the optimal financial asset portfolios, offering additional information to those investing in the capital market. The optimal neutrosophic portfolios are those categories of portfolios consisting of two or more financial assets, modeled using neutrosophic triangular numbers, that allow for the determination of financial performance indicators, respectively the neutrosophic average, the neutrosophic risk, for each financial asset, and the neutrosophic covariance as well as the determination of the portfolio return, respectively of the portfolio risk. There are two essential conditions established by rational investors on the capital market to obtain an optimal financial assets portfolio, respectively by fixing the financial return at the estimated level as well as minimizing the risk of the financial assets neutrosophic portfolio. These conditions allowed us to compute the financial assets’ share in the total value of the neutrosophic portfolios, for which the financial return reaches the level set by investors and the financial risk has the minimum value. In financial terms, the financial assets’ share answers the legitimate question of rational investors in the capital market regarding the amount of money they must invest in compliance with the optimal conditions regarding the neutrosophic return and risk.
Highlights
The theoretical contribution of this research paper is given by the theoretical substantiation, with the help of neutrosophic fuzzy triangular numbers of the performance indicators specific to the optimal financial assets’ portfolios, namely, portfolio structure, portfolio risk as well as portfolio return
The optimal neutrosophic portfolios are those categories of portfolios consisting of two or more financial assets, modeled using neutrosophic triangular numbers that allow for the determination of financial performance indicators, respectively the neutrosophic average return of the neutrosophic risk for each financial asset and the neutrosophic covariance as well as the determination of the portfolio return of the portfolio risk
To be considered optimal neutrosophic portfolios, they must meet two additional conditions, namely: fixing the financial return at an estimated level as well as minimizing the financial asset neutrosophic portfolio’s risk. For this category of neutrosophic portfolios within this study, we determined two KPIs, namely: the portfolio structure that allows for the determination of the financial asset weight in the total value of the portfolio under optimal portfolio conditions under the conditions of a given value for return and under the conditions of minimizing the portfolio risk
Summary
Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations. The theoretical contribution of this research paper is given by the theoretical substantiation, with the help of neutrosophic fuzzy triangular numbers of the performance indicators specific to the optimal financial assets’ portfolios, namely, portfolio structure, portfolio risk as well as portfolio return. This research paper used neutrosophic fuzzy numbers because they best describe the investor’s need for information on the likelihood of capital market investment success They contain three categories of additional information for any investor, namely, the high probability of achieving an investment strategy conventionally denoted by (w), the low probability of achievement denoted by (u), and the uncertainty denoted by (y).
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