Portfolio optimization with probability distortion

Distortion risk measures became popular due to their coherence and ability to align with investor risk and wealth attitudes. We introduce two distinct portfolio allocation formulations based on these measures, providing the necessary computational framework for practical application. • We propose an efficient LP formulation for the proposed portfolio allocations problem. • We propose a convergent solution for the distortion risk measure minimization. • We compare the results of the two methods in terms of errors and computational times.