Diversified Mean-Value at Risk Models with Transaction Costs for International Portfolio Optimization Using Uncertainty Theory

Abstract

The present paper proposes new international portfolio optimization problems when the foreign exchange rates and the future security prices are modelled by uncertain variables, given by experts’ estimations and predicted by experts instead of historical data. The use of uncertain measure is justified. We provide Mean-VaR models for international portfolio Some real-world constraints such as portfolio diversification and transaction costs were taken into consideration. In addition, equivalent deterministic forms have been proposed when security prices and exchange rates follow certain types of uncertainty distributions. Finally, numerical applications are given to establish the impact of reality factors considered on uncertain international portfolio investment.