Document Type : Research Paper

Authors

• Iman Ebrahimi ¹
• Hadi Mokhtari ²
• Mohammad Taghi Rezvan ³

¹ Master of Business Administration, Faculty of Finance, Management and Entrepreneurship, Kashan University, Kashan, Iran

² Associate Professor, Department of Industrial Engineering, Faculty of Engineering, University of Kashan, Kashan, Iran

³ Assistant Professor, Department of Industrial Engineering, Faculty of Engineering, University of Kashan, Kashan, Iran

Abstract

The cryptocurrency market, known for being one of the most volatile financial markets, has recently attracted significant attention. While some investors avoid entering this market due to fear of losses, others are eager to pursue substantial profits. This research employs scientific analysis and advanced models to examine the characteristics of this market. In the first phase, the focus is on portfolio formation in the cryptocurrency market based on relevant indicators. After evaluating the created portfolio, Markowitz, Sharpe and Sortino models are utilized for portfolio optimization. This approach allows for the creation of a portfolio that aligns with individual risk preferences, and passive portfolio management is also considered. In the second phase of the research, equal-weighted portfolios were formed alongside a market portfolio, and nine other selected portfolios were chosen based on criteria such as highest market value and best risk-return ratio. A particle swam optimization algorithm was employed to assess the performance of these portfolios. The results indicate that portfolios containing cryptocurrencies with the highest market value exhibit lower risk, and the Sharpe optimization model outperforms other models. Additionally, selecting a portfolio based on the standard deviation of return-to-risk ratio yields more favorable outcomes. This study also presents an innovative method for analyzing the coefficient of variation, leading to a better understanding of the relationship between return and risk. Ultimately, the findings emphasize that utilizing scientific trading strategies can facilitate risk management and enhance returns.

Keywords

• Cryptocurrency Market
• Investment Portfolio
• Reward to Risk Ratio
• Optimization Models Particle Swam Optimization algorithm

Main Subjects

• uncertainty