A Fuzzy AHP Application on Evaluation of High-Yield Bond Investment

The returns and risks of high-yield bond (HYB) lie between the stocks and Treasury bonds. In view of investment opportunities and the rate of return, the advantages of HYB are both lower risks and higher shares. Therefore, HYB has become one of important components in the portfolios. The purpose of this study is to identify critical factors related to the selection of HYB. Primary criteria to evaluate HYB selection are obtained by the literatures survey and applying fuzzy Delphi method (FDM), and then fuzzy analytic hierarchy process (FAHP) is employed to calculate the weights of these criteria, so as to build the fuzzy multi-criteria model of HYB investment. The results indicate a greatest weight on the dimension of economic environment, and three critical evaluation criteria related to HYB selection are: (1) spread versus Treasury, (2) bond callability, and (3) default rate indicator. Key-Words: High-Yield Bond, Portfolio Management, Credit Rating, Financial Failure, Analytic Hierarchy Process (AHP), Fuzzy Delphi Method (FDM), Fuzzy Analytic Hierarchy Process (FAHP).