Multiobjective Investment Policy for a Nonlinear Stochastic Financial System: A Fuzzy Approach
The financial market always suffers from continuous and discontinuous (jump) changes and can be regarded as a nonlinear stochastic jump diffusion system. Most investors expect their investment policies to be not only higher benefits but also lower risk as a multiobjective optimization problem (MOP)....
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| Veröffentlicht in: | IEEE transactions on fuzzy systems Jg. 25; H. 2; S. 460 - 474 |
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| Sprache: | Englisch |
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01.04.2017
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| ISSN: | 1063-6706, 1941-0034 |
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| Abstract | The financial market always suffers from continuous and discontinuous (jump) changes and can be regarded as a nonlinear stochastic jump diffusion system. Most investors expect their investment policies to be not only higher benefits but also lower risk as a multiobjective optimization problem (MOP). In this study, a multiobjective H 2 /H ∞ fuzzy investment is proposed for nonlinear stochastic jump diffusion financial systems to achieve the desired target with minimum investment cost and risk in Pareto optimal sense, simultaneously. The Takagi-Sugeno (T-S) fuzzy model is used to approximate the nonlinear stochastic jump diffusion financial system to simplify the multiobjective H 2 /H ∞ investment policy design procedure. By the help of the T-S fuzzy model, the multiobjective H 2 /H ∞ fuzzy investment policy problem of nonlinear stochastic financial system can be transformed to a linear-matrix-inequality-constrained (LMI-constrained) MOP to avoid solving the annoying Hamilton-Jacobi inequalities. Because the LMI-constrained MOP is not easy to directly calculate its Pareto optimal solutions, an indirect method is proposed to solve this MOP for the multiobjective H 2 /H ∞ fuzzy investment policy design of nonlinear stochastic jump diffusion financial systems. An LMI-constrained multiobjective evolution algorithm (LMI-constrained MOEA) is also developed to efficiently solve the Pareto optimal solutions of the LMI-constrained MOP for the multiobjective H 2 /H 0', fuzzy investment policy design of nonlinear stochastic jump diffusion financial systems. When the Pareto optimal regulation solutions are solved by the proposed LMI-constrained MOEA, investors can select one investment policy to achieve their desired target with minimum investment cost and risk according to his/her own preference. |
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| AbstractList | The financial market always suffers from continuous and discontinuous (jump) changes and can be regarded as a nonlinear stochastic jump diffusion system. Most investors expect their investment policies to be not only higher benefits but also lower risk as a multiobjective optimization problem (MOP). In this study, a multiobjective H 2 /H ∞ fuzzy investment is proposed for nonlinear stochastic jump diffusion financial systems to achieve the desired target with minimum investment cost and risk in Pareto optimal sense, simultaneously. The Takagi-Sugeno (T-S) fuzzy model is used to approximate the nonlinear stochastic jump diffusion financial system to simplify the multiobjective H 2 /H ∞ investment policy design procedure. By the help of the T-S fuzzy model, the multiobjective H 2 /H ∞ fuzzy investment policy problem of nonlinear stochastic financial system can be transformed to a linear-matrix-inequality-constrained (LMI-constrained) MOP to avoid solving the annoying Hamilton-Jacobi inequalities. Because the LMI-constrained MOP is not easy to directly calculate its Pareto optimal solutions, an indirect method is proposed to solve this MOP for the multiobjective H 2 /H ∞ fuzzy investment policy design of nonlinear stochastic jump diffusion financial systems. An LMI-constrained multiobjective evolution algorithm (LMI-constrained MOEA) is also developed to efficiently solve the Pareto optimal solutions of the LMI-constrained MOP for the multiobjective H 2 /H 0', fuzzy investment policy design of nonlinear stochastic jump diffusion financial systems. When the Pareto optimal regulation solutions are solved by the proposed LMI-constrained MOEA, investors can select one investment policy to achieve their desired target with minimum investment cost and risk according to his/her own preference. |
| Author | Chien-Feng Wu Weihai Zhang Bor-Sen Chen |
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| SubjectTerms | Indexes Investment Linear-matrix-inequality (LMI)-constrained multiobjective evolution algorithm (MOEA) Mathematical model multiobjective <named-content xmlns:xlink="http://www.w3.org/1999/xlink" xmlns:ali="http://www.niso.org/schemas/ali/1.0/" xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" content-type="math" xlink:type="simple"> <inline-formula> <tex-math notation="LaTeX"> H_{2}/H_{\infty } </tex-math> </inline-formula> </named-content> fuzzy investment policy nonlinear stochastic jump diffusion system Pareto optimality Pareto optimization Robustness stochastic financial system Stochastic processes Takagi–Sugeno (T–S) fuzzy model |
| Title | Multiobjective Investment Policy for a Nonlinear Stochastic Financial System: A Fuzzy Approach |
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