SIMULATION OPTIMIZATION: APPLICATIONS IN RISK MANAGEMENT

Marco Better (), Fred Glover (), Gary Kochenberger () and Haibo Wang ()
Additional contact information
Marco Better: OptTek Systems, Inc., 1919 Seventh Street, Boulder, Colorado 80302, USA
Fred Glover: OptTek Systems, Inc., 1919 Seventh Street, Boulder, Colorado 80302, USA
Gary Kochenberger: University of Colorado Denver, 1250 14th Street, Suite 215, Denver, Colorado 80202, USA
Haibo Wang: Texas A&M International University, Laredo, TX 78041, USA

International Journal of Information Technology & Decision Making (IJITDM), 2008, vol. 07, issue 04, 571-587

Abstract: Simulation optimization is providing solutions to important practical problems previously beyond reach. This paper explores how new approaches are significantly expanding the power of simulation optimization for managing risk. Recent advances in simulation optimization technology are leading to new opportunities to solve problems more effectively. Specifically, in applications involving risk and uncertainty, simulation optimization surpasses the capabilities of other optimization methods not only in the quality of solutions but also in their interpretability and practicality. In this paper, we demonstrate the advantages of using a simulation optimization approach to tackle risky decisions, by showcasing the methodology on two popular applications from the areas of finance and business process design.

Keywords: Optimization; simulation; portfolio selection; risk management (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (7)

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DOI: 10.1142/S0219622008003137

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