Portfolio Selection with respect to the Probabilistic Preference in Variable Risk Appetites: A Double-Hierarchy Analysis Method

Algorithm 2

Risk-appetite coefficient model by historical simulation and probabilistic preference.

	Step 1: provide the portfolio of different types about financial products for investors, and investors will make their choice according to their own risk and return preferences. Investment program: , investors can choose rankings according to their preferences, and this ranking includes all financial products we provided.
	Step 2: calculate and based on models (3) and (4) simultaneously.
	Step 3: calculate the appetite coefficient. We can obtain and after merging similar items based on the investor’s choice; then, and .
	Step 4: take and into model (2) based on software, and we will get the appetite coefficient conveniently.
	Step 5: to clearly calculate the appetite coefficient , like Step 3, we assume that there are four financial products to choose, allowing investors to choose between financial products’ risks and returns according to model (8), and get the result in Table 2.