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THE DYNAMIC PORTFOLIO SELECTION MODEL BASED ON EVENT TREE
Abstract
In this paper the authors focus on the problem of portfolio selection based on Mean Absolute Deviation risk measure. They try to design new model based of the idea of event tree. It means, that the investor make the decision in every state of investment separate and hold the portfolio from previous period, or change the portfolio. So the investor can optimize the decision on the financial market. The biggest advantage of this model is, that the solution can be never worst like the solution, we get with standard optimization models for managing portfolio. The portfolio selection model presented in this paper is make linear and so it is easy to find the optimal solution using standard programs.
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