A Genetic Algorithm Approach to Shariah-Compliant Portfolio Optimization in a Fuzzy Environment with Transaction Costs Considerations
Shariah-Compliant Portfolio Optimization
Résumé
In this article, a novel framework is put forth for the optimization of portfolios that adhere to Shariah principles and involve fuzzy variables. Various approaches have been examined to construct financial portfolios that are compliant with Shariah principles. The semi-spread of the fuzzy portfolio return is regarded as a risk measure in Islamic finance, encompassing two parameters that represent the investor's level of risk aversion. By utilizing fuzzy variables, the optimization model becomes more realistic and enables the consideration of uncertainty. Different types of transaction costs have been modeled and taken into account in the optimization model. We employed a genetic algorithm (GA) to solve the portfolio optimization problem. The proposed model simplifies the computational complexity and facilitates the future development of research on the optimization model for Shariah-compliant fuzzy pricing.
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