Fuzzy expectation-spread-skewness model for Shariah-compliant portfolio optimisation
by Imen Ben Abdelwahed; Faouzi Trabelsi
International Journal of Operational Research (IJOR), Vol. 41, No. 4, 2021

Abstract: It is well known that fuzzy portfolios are very useful for investors who are looking for a path to manage risk when dealing with their long-term investment portfolio. In this paper, we propose a new framework to portfolio selection problem based on fuzzy theory in the context of Islamic finance. In order to measure how much an investor satisfies with his profit, skewness is adopted in addition to the first two moments of the distribution. We formulate a new fuzzy (Shariah-compliant) portfolio optimisation problem, referred as 'fuzzy expectation-spread-skewness (𝔽𝔼 - Sp - S) model'. We discuss the existence of the optimal solution. Besides, we provide numerical methods to approximate the solution, following in parallel probabilistic and analytical approaches. Some examples of application are also studied. Finally, we compare the followed numerical approaches and we state some financial interpretations.

Online publication date: Mon, 16-Aug-2021

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