Credibility measures in portfolio analysis: From possibilistic to probabilistic models

This paper treats risk based on the notions of credibility measure and credibility expected value. Firstly, the paper derives and discusses the credibility expected value. Secondly, the paper presents a new method of analysis of possibilistic portfolios. The new step is a construction by which with a possibilistic portfolio one associates a probabilistic portfolio. The problem solving of possibilistic portfolio gets down to the problem solving of associated probabilistic portfolio. For the latter one a variety of solving methods exist, from which we can choose the most appropriate one for the initial problem. Risk evaluation in the context of probabilistic portfolio leads to an understanding of risk for the possibilistic portfolio. The paper presents an application case of a venture capitalist firm, which needs to solve the shares of its budget to be invested to start-up companies.