coherent risk measures

A General Wasserstein Framework for Data-driven Distributionally Robust Optimization: Tractability and Applications

  • Jonathan Yu-Meng Li
  • Tiantian Mao
    • Categories Robust Optimization, Stochastic Programming Tags , ,

    Data-driven distributionally robust optimization is a recently emerging paradigm aimed at finding a solution that is driven by sample data but is protected against sampling errors. An increasingly popular approach, known as Wasserstein distributionally robust optimization (DRO), achieves this by applying the Wasserstein metric to construct a ball centred at the empirical distribution and finding … Read more

    A Primal-Dual Algorithm for Risk Minimization

  • Drew P. Kouri
  • Thomas Surowiec
    • Categories Infinite Dimensional Optimization, Nonsmooth Optimization, Stochastic Programming Tags , , ,

    In this paper, we develop an algorithm to efficiently solve risk-averse optimization problems posed in reflexive Banach space. Such problems often arise in many practical applications as, e.g., optimization problems constrained by partial differential equations with uncertain inputs. Unfortunately, for many popular risk models including the coherent risk measures, the resulting risk-averse objective function is … Read more

    Risk averse stochastic programming: time consistency and optimal stopping

  • Alois Pichler
  • Alexander Shapiro
    • Categories Dynamic Programming, Stochastic Programming Tags , , , , ,

    Bellman formulated a vague principle for optimization over time, which characterizes optimal policies by stating that a decision maker should not regret previous decisions retrospectively. This paper addresses time consistency in stochastic optimization. The problem is stated in generality first. The paper discusses time consistent decision-making by addressing risk measures which are recursive, nested, dynamically … Read more

    Time inconsistency of optimal policies of distributionally robust inventory models

  • Alexander Shapiro
  • Linwei Xin
    • Categories Robust Optimization, Stochastic Programming, Supply Chain Management Tags , , , , ,

    In this paper, we investigate optimal policies of distributionally robust (risk averse) inventory models. We demonstrate that if the respective risk measures are not strictly monotone, then there may exist infinitely many optimal policies which are not base-stock and not time consistent. This is in a sharp contrast with the risk neutral formulation of the … Read more

    Modeling Time-dependent Randomness in Stochastic Dual Dynamic Programming

  • Nils Löhndorf
  • Alexander Shapiro
    • Categories Stochastic Programming Tags , , ,

    We consider the multistage stochastic programming problem where uncertainty enters the right-hand sides of the problem. Stochastic Dual Dynamic Programming (SDDP) is a popular method to solve such problems under the assumption that the random data process is stagewise independent. There exist two approaches to incorporate dependence into SDDP. One approach is to model the … Read more

    An Analytical Study of Norms and Banach Spaces Induced by the Entropic Value-at-Risk

  • Ahmadi-Javid Amir
  • Alois Pichler
    • Categories Finance and Economics, Robust Optimization, Stochastic Programming Tags , , , , , , , , , ,

    This paper addresses the Entropic Value-at-Risk (EVaR), a recently introduced coherent risk measure. It is demonstrated that the norms induced by EVaR induce the same Banach spaces, irrespective of the confidence level. Three spaces, called the primal, dual, and bidual entropic spaces, corresponding with EVaR are fully studied. It is shown that these spaces equipped … Read more

    Statistical inference and hypotheses testing of risk averse stochastic programs

  • Vincent Guigues
  • Alexander Shapiro
  • Volker Krätschmer
    • Categories Stochastic Programming Tags , , , , ,

    We study statistical properties of the optimal value and optimal solutions of the Sample Average Approximation of risk averse stochastic problems. Central Limit Theorem type results are derived for the optimal value when the stochastic program is expressed in terms of a law invariant coherent risk measure having a discrete Kusuoka representation. The obtained results … Read more

    Time and Dynamic Consistency of Risk Averse Stochastic Programs

  • Alois Pichler
  • Alexander Shapiro
    • Categories Stochastic Programming Tags , , ,

    In various settings time consistency in dynamic programming has been addressed by many authors going all the way back to original developments by Richard Bellman. The basic idea of the involved dynamic principle is that a policy designed at the first stage, before observing realizations of the random data, should not be changed at the … Read more

    Decomposability and time consistency of risk averse multistage programs

  • Alexander Shapiro
  • Kerem Ugurlu
    • Categories Stochastic Programming Tags , ,

    Two approaches to time consistency of risk averse multistage stochastic problems were dis- cussed in the recent literature. In one approach certain properties of the corresponding risk measure are postulated which imply its decomposability. The other approach deals directly with conditional optimality of solutions of the considered problem. The aim of this paper is to … Read more

    Distributionally Robust Stochastic Programming

  • Alexander Shapiro
    • Categories Robust Optimization, Stochastic Programming Tags , , , , ,

    In this paper we study distributionally robust stochastic programming in a setting where there is a specified reference probability measure and the uncertainty set of probability measures consists of measures in some sense close to the reference measure. We discuss law invariance of the associated worst case functional and consider two basic constructions of such … Read more