An integrated eigenvector–DEA–TOPSIS methodology for portfolio risk evaluation in the FOREX spot market

摘要

The foreign exchange market (FOREX) is the largest financial market in the world, with a volume of over $2 trillion daily. Decision making about buying and selling the existing products in this market depends on several effective factors which cause the high risk in it and make it a sensitive job. So in this paper a new method which is extracted from the multiple decision making methods named eigenvector–DEA–TOPSIS methodology is presented to evaluate the risk of the number of related portfolios to this market. The eigenvector technique is used to determine the weights of criteria and some linguistic terms are applied for assessing portfolio risks under each criterion, then in order to determine the value of linguistic terms we use the data envelopment analysis (DEA) method. Finally we use TOPSIS method for aggregating portfolio risks under different criteria into an overall risk score for each portfolio and ranking the portfolios according to their risks. The integrated eigenvector–DEA–TOPSIS methodology is applicable to any number of decision alternatives and is illustrated with a numerical example.