IDEAS home Printed from https://ideas.repec.org/a/spr/annopr/v200y2012i1p55-7410.1007-s10479-010-0824-9.html
   My bibliography  Save this article

Robustness in stochastic programs with risk constraints

Author

Listed:
  • Jitka Dupačová
  • Miloš Kopa

Abstract

This paper is a contribution to the robustness analysis for stochastic programs whose set of feasible solutions depends on the probability distribution P. For various reasons, probability distribution P may not be precisely specified and we study robustness of results with respect to perturbations of P. The main tool is the contamination technique. For the optimal value, local contamination bounds are derived and applied to robustness analysis of the optimal value of a portfolio performance under risk-shaping CVaR constraints. A new robust portfolio efficiency test with respect to the second order stochastic dominance criterion is suggested and the contamination methodology is exploited to analyze its resistance with respect to additional scenarios. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Jitka Dupačová & Miloš Kopa, 2012. "Robustness in stochastic programs with risk constraints," Annals of Operations Research, Springer, vol. 200(1), pages 55-74, November.
    • Handle: RePEc:spr:annopr:v:200:y:2012:i:1:p:55-74:10.1007/s10479-010-0824-9
    DOI: 10.1007/s10479-010-0824-9
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10479-010-0824-9
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10479-010-0824-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andrzej Ruszczynski & Robert J. Vanderbei, 2003. "Frontiers of Stochastically Nondominated Portfolios," Econometrica, Econometric Society, vol. 71(4), pages 1287-1297, July.
    2. Timo Kuosmanen, 2004. "Efficient Diversification According to Stochastic Dominance Criteria," Management Science, INFORMS, vol. 50(10), pages 1390-1406, October.
    3. Soňa Kilianová & Georg Pflug, 2009. "Optimal pension fund management under multi-period risk minimization," Annals of Operations Research, Springer, vol. 166(1), pages 261-270, February.
    4. Georg Pflug & David Wozabal, 2007. "Ambiguity in portfolio selection," Quantitative Finance, Taylor & Francis Journals, vol. 7(4), pages 435-442.
    5. B. K. Pagnoncelli & S. Ahmed & A. Shapiro, 2009. "Sample Average Approximation Method for Chance Constrained Programming: Theory and Applications," Journal of Optimization Theory and Applications, Springer, vol. 142(2), pages 399-416, August.
    6. Rockafellar, R. Tyrrell & Uryasev, Stanislav, 2002. "Conditional value-at-risk for general loss distributions," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1443-1471, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Miloš Kopa & Tomáš Rusý, 2021. "A decision-dependent randomness stochastic program for asset–liability management model with a pricing decision," Annals of Operations Research, Springer, vol. 299(1), pages 241-271, April.
    2. Dimitris Andriosopoulos & Michalis Doumpos & Panos M. Pardalos & Constantin Zopounidis, 2019. "Computational approaches and data analytics in financial services: A literature review," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 70(10), pages 1581-1599, October.
    3. Sree Vinutha Venkataraman & S. V. D. Nageswara Rao, 2023. "Stochastic dominance algorithms with application to mutual fund performance evaluation," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 681-698, January.
    4. Giorgio Consigli & Vittorio Moriggia & Sebastiano Vitali, 2020. "Long-term individual financial planning under stochastic dominance constraints," Annals of Operations Research, Springer, vol. 292(2), pages 973-1000, September.
    5. Christodoulakis, George & Mohamed, Abdulkadir & Topaloglou, Nikolas, 2018. "Optimal privatization portfolios in the presence of arbitrary risk aversion," European Journal of Operational Research, Elsevier, vol. 265(3), pages 1172-1191.
    6. František Zapletal & Martin Šmíd & Miloš Kopa, 2020. "Multi-stage emissions management of a steel company," Annals of Operations Research, Springer, vol. 292(2), pages 735-751, September.
    7. Miloš Kopa & Vittorio Moriggia & Sebastiano Vitali, 2018. "Individual optimal pension allocation under stochastic dominance constraints," Annals of Operations Research, Springer, vol. 260(1), pages 255-291, January.
    8. Domínguez, Ruth & Vitali, Sebastiano & Carrión, Miguel & Moriggia, Vittorio, 2021. "Analysing decarbonizing strategies in the European power system applying stochastic dominance constraints," Energy Economics, Elsevier, vol. 101(C).
    9. Sebastiano Vitali & Vittorio Moriggia, 2021. "Pension fund management with investment certificates and stochastic dominance," Annals of Operations Research, Springer, vol. 299(1), pages 273-292, April.
    10. Moriggia, Vittorio & Kopa, Miloš & Vitali, Sebastiano, 2019. "Pension fund management with hedging derivatives, stochastic dominance and nodal contamination," Omega, Elsevier, vol. 87(C), pages 127-141.
    11. Post, Thierry & Kopa, Miloš, 2013. "General linear formulations of stochastic dominance criteria," European Journal of Operational Research, Elsevier, vol. 230(2), pages 321-332.
    12. Oumayma Bahri & El-Ghazali Talbi, 2021. "Robustness-based approach for fuzzy multi-objective problems," Annals of Operations Research, Springer, vol. 296(1), pages 707-733, January.
    13. Jamshidi, Movahed & Kebriaei, Hamed & Sheikh-El-Eslami, Mohammad-Kazem, 2018. "An interval-based stochastic dominance approach for decision making in forward contracts of electricity market," Energy, Elsevier, vol. 158(C), pages 383-395.
    14. Kopa, Miloš & Rusý, Tomáš, 2023. "Robustness of stochastic programs with endogenous randomness via contamination," European Journal of Operational Research, Elsevier, vol. 305(3), pages 1259-1272.
    15. Shunichi Ohmori, 2021. "A Predictive Prescription Using Minimum Volume k -Nearest Neighbor Enclosing Ellipsoid and Robust Optimization," Mathematics, MDPI, vol. 9(2), pages 1-16, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kallio, Markku & Dehghan Hardoroudi, Nasim, 2018. "Second-order stochastic dominance constrained portfolio optimization: Theory and computational tests," European Journal of Operational Research, Elsevier, vol. 264(2), pages 675-685.
    2. Andrey Lizyayev, 2012. "Stochastic dominance efficiency analysis of diversified portfolios: classification, comparison and refinements," Annals of Operations Research, Springer, vol. 196(1), pages 391-410, July.
    3. Miloš Kopa & Vittorio Moriggia & Sebastiano Vitali, 2018. "Individual optimal pension allocation under stochastic dominance constraints," Annals of Operations Research, Springer, vol. 260(1), pages 255-291, January.
    4. Lizyayev, Andrey & Ruszczyński, Andrzej, 2012. "Tractable Almost Stochastic Dominance," European Journal of Operational Research, Elsevier, vol. 218(2), pages 448-455.
    5. Bellini, Fabio & Klar, Bernhard & Müller, Alfred & Rosazza Gianin, Emanuela, 2014. "Generalized quantiles as risk measures," Insurance: Mathematics and Economics, Elsevier, vol. 54(C), pages 41-48.
    6. Ran Ji & Miguel A. Lejeune, 2021. "Data-Driven Optimization of Reward-Risk Ratio Measures," INFORMS Journal on Computing, INFORMS, vol. 33(3), pages 1120-1137, July.
    7. Leili Javanmardi & Yuri Lawryshyn, 2016. "A new rank dependent utility approach to model risk averse preferences in portfolio optimization," Annals of Operations Research, Springer, vol. 237(1), pages 161-176, February.
    8. Martin Branda & Max Bucher & Michal Červinka & Alexandra Schwartz, 2018. "Convergence of a Scholtes-type regularization method for cardinality-constrained optimization problems with an application in sparse robust portfolio optimization," Computational Optimization and Applications, Springer, vol. 70(2), pages 503-530, June.
    9. Nasim Dehghan Hardoroudi & Abolfazl Keshvari & Markku Kallio & Pekka Korhonen, 2017. "Solving cardinality constrained mean-variance portfolio problems via MILP," Annals of Operations Research, Springer, vol. 254(1), pages 47-59, July.
    10. Bruni, Renato & Cesarone, Francesco & Scozzari, Andrea & Tardella, Fabio, 2017. "On exact and approximate stochastic dominance strategies for portfolio selection," European Journal of Operational Research, Elsevier, vol. 259(1), pages 322-329.
    11. Alexandre Street, 2010. "On the Conditional Value-at-Risk probability-dependent utility function," Theory and Decision, Springer, vol. 68(1), pages 49-68, February.
    12. Heufer, Jan, 2014. "Nonparametric comparative revealed risk aversion," Journal of Economic Theory, Elsevier, vol. 153(C), pages 569-616.
    13. Felix Fie{ss}inger & Mitja Stadje, 2023. "Time-Consistent Asset Allocation for Risk Measures in a L\'evy Market," Papers 2305.09471, arXiv.org, revised Jun 2023.
    14. L. Jeff Hong & Zhaolin Hu & Liwei Zhang, 2014. "Conditional Value-at-Risk Approximation to Value-at-Risk Constrained Programs: A Remedy via Monte Carlo," INFORMS Journal on Computing, INFORMS, vol. 26(2), pages 385-400, May.
    15. Martin Branda & Miloš Kopa, 2014. "On relations between DEA-risk models and stochastic dominance efficiency tests," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 22(1), pages 13-35, March.
    16. Dupačová, Jitka & Kopa, Miloš, 2014. "Robustness of optimal portfolios under risk and stochastic dominance constraints," European Journal of Operational Research, Elsevier, vol. 234(2), pages 434-441.
    17. Markéta Horejšová & Sebastiano Vitali & Miloš Kopa & Vittorio Moriggia, 2020. "Evaluation of scenario reduction algorithms with nested distance," Computational Management Science, Springer, vol. 17(2), pages 241-275, June.
    18. Leili Javanmardi & Yuri Lawryshyn, 2016. "A new rank dependent utility approach to model risk averse preferences in portfolio optimization," Annals of Operations Research, Springer, vol. 237(1), pages 161-176, February.
    19. Zhi Chen & Melvyn Sim & Huan Xu, 2019. "Distributionally Robust Optimization with Infinitely Constrained Ambiguity Sets," Operations Research, INFORMS, vol. 67(5), pages 1328-1344, September.
    20. Malavasi, Matteo & Ortobelli Lozza, Sergio & Trück, Stefan, 2021. "Second order of stochastic dominance efficiency vs mean variance efficiency," European Journal of Operational Research, Elsevier, vol. 290(3), pages 1192-1206.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:annopr:v:200:y:2012:i:1:p:55-74:10.1007/s10479-010-0824-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.