Re: Fuzzy sets & portfolio theory


Subject: Re: Fuzzy sets & portfolio theory
From: Amit Dubey (adubey@student.math.uwaterloo.ca)
Date: Wed May 31 2000 - 00:12:07 MET DST


In article <01cfbaf0.7400f3fb@usw-ex0109-068.remarq.com>,
Viviana <viviana_itNOviSPAM@altavista.com.invalid> wrote:
>Dear all,
> I'm a M.Phil candidate. My thesys project involves
>the approach to portfolio theory by means of " non
>conventional methods".
>
> I'd like to have some pointers to materials, in
>particular for fuzzy sets approach.
>
> Thanks in advance,
> Viviana

    You might want to do a search for probability theory. I don't have
any references off hand, but possibility theory is a generalization of
probability theory that uses fuzzy sets rather than crisp sets. The
advantage of this is that you can now model events which have both
an uncertain and an imprecise outcome. Now, from what little I understand
of portfolio theory, the historical variance (which is known precisely)
is the primary factor in deciding an optimal portfolio... so possibilities
don't give you anything in this case. However, if other factors are
added to the model (eg, quality of managers if you're talking about
stocks) it may take sense to use possibilities.

    Hope this helps,
    Amit Dubey

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