Restricted risk measures and robust optimization

Guido Lagos, Daniel Espinoza, Eduardo Moreno and Juan Pablo Vielma

European Journal of Operational Research, 2015, vol. 241, issue 3, 771-782

Abstract: In this paper we consider characterizations of the robust uncertainty sets associated with coherent and distortion risk measures. In this context we show that if we are willing to enforce the coherent or distortion axioms only on random variables that are affine or linear functions of the vector of random parameters, we may consider some new variants of the uncertainty sets determined by the classical characterizations. We also show that in the finite probability case these variants are simple transformations of the classical sets. Finally we present results of computational experiments that suggest that the risk measures associated with these new uncertainty sets can help mitigate estimation errors of the Conditional Value-at-Risk.

Keywords: Risk management; Stochastic programming; Uncertainty modeling (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:241:y:2015:i:3:p:771-782

DOI: 10.1016/j.ejor.2014.09.024

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