Steve Zymler We present a risk-averse multi-dimensional newsvendor model for a class of products whose demands are strongly correlated and subject to fashion trends that are not fully understood at the time when orders are placed. The demand distribution is known to be multimodal in the sense that there are spatially separated clusters of probability mass but … Read more
We develop tractable semidefinite programming (SDP) based approximations for distributionally robust individual and joint chance constraints, assuming that only the first- and second-order moments as well as the support of the uncertain parameters are given. It is known that robust chance constraints can be conservatively approximated by Worst-Case Conditional Value-at-Risk (CVaR) constraints. We first prove … Read more
Portfolio optimization problems involving Value-at-Risk (VaR) are often computationally intractable and require complete information about the return distribution of the portfolio constituents, which is rarely available in practice. These difficulties are compounded when the portfolio contains derivatives. We develop two tractable conservative approximations for the VaR of a derivative portfolio by evaluating the worst-case VaR … Read more
Robust portfolio optimization finds the worst-case portfolio return given that the asset returns are realized within a prescribed uncertainty set. If the uncertainty set is not too large, the resulting portfolio performs well under normal market conditions. However, its performance may substantially degrade in the presence of market crashes, that is, if the asset returns … Read more