Abstract
In recent years, in the field of bond investment, default has come to be recognized. In this paper, we treat multi-period bond portfolio selection problem with default risk. Uncertain elements associated with bond investment, such as future annual interest, default and so on, are treated as possibilistic variables and fuzzy random variables. The problem is formulated as a fuzzy random linear programming problem. Using fuzzy expected values and the necessity measure, we reduce the problem to the linear programming problem. Since the problem has a special structure called staircase structure, we apply an algorithm based on the nested decomposition method.
