FORMULATION OF CONCAVE-CONVEX FRACTIONAL PROGRAMMING MODEL FOR BANK PORTFOLIO SELECTIONS

Abstract

In this paper, a concave-convex fractional programming model for bank portfolio selections is formulated. We have transformed the model into a concave quadratic programming problem and developed a technique for its solution. A real life application of the model is performed with twelve banks in Nigeria. The optimal solution determined by the proportion of investment to be made by an investor in each bank in order to maximize the expected returns at minimum risk is highlighted. However, the computational results show that the proposed model can generate a favourable portfolio strategy according to the investor’s satisfactory degree.  The trade-off curve also indicates the amount of risk that is commensurate with a particular expected return.

Key words: concave-convex, fractional programming problem, optimization, transformation