A sample-path approach to optimal position liquidation

Krokhmal, Pavlo A.; Uryasev, Stan

doi:10.1007/s10479-006-0143-3

Cited by 15 publications

(7 citation statements)

References 27 publications

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“…The stochastic optimization approach is advantageous in our setting because it permits the introduction of risk constraints also in intermediate time periods. This would be practically impossible with dynamic programming approaches [56] where the intermediate nodes represent the maximum cash position when discounting from the terminal time period and hence do not account for the cash-flow impacts of past decisions [57].…”

Section: B Contract Portfolio Optimizationmentioning

confidence: 99%

Optimization of Electricity Retailer's Contract Portfolio Subject to Risk Preferences

Kettunen

Salo

Bunn

2010

IEEE Trans. Power Syst.

123

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When an electricity retailer faces volume risk in meeting load and spot price risk in purchasing from the wholesale market, conventional risk management optimization methods can be quite inefficient. For the management of an electricity contract portfolio in this context, we develop a multistage stochastic optimization approach which accounts for the uncertainties of both electricity prices and loads, and which permits the specification of conditional-value-at-risk requirements to optimize hedging across intermediate stages in the planning horizons. Our experimental results, based on real data from Nordpool, suggest that the modeling of price and load correlations is particularly important. The sensitivity analysis is extended to characterize the behavior of retailers with different risk attitudes. Thus, we observe that a risk neutral retailer is more susceptible to price-related than load-related uncertainties in terms of the expected cost of satisfying the load, and that a risk averse retailer is especially sensitive to the drivers of the forward risk premium.

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Section: B Contract Portfolio Optimizationmentioning

confidence: 99%

Optimization of Electricity Retailer's Contract Portfolio Subject to Risk Preferences

Kettunen

Salo

Bunn

2010

IEEE Trans. Power Syst.

123

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“…Examples include risk constraints, value constraints, and bounds on position changes (see Krokhmal et al [16,17] and Krokhmal and Uryasev [15] for example). The projection procedure would become computationally expensive when such side-constraints are present.…”

Section: Projectionmentioning

confidence: 99%

Portfolio optimization by minimizing conditional value-at-risk via nondifferentiable optimization

2008

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“…3 It is also possible to go from generating scenarios to bundling them to get trees. An example of this is given in Krokhmal and Uryasev (2003).…”

Section: Trees Of Stochastic Variablesmentioning

confidence: 99%

Strategic foreign reserves risk management: Analytical framework

Claessens

Kreuser²

2006

Ann Oper Res

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We present an analytical framework for active foreign exchange reserves management that integrates risk-return objectives with macroeconomic, macro-prudential and sovereign debt management concerns. Our framework allows for very general objective functions, does not restrict the class of eligible stochastic processes or limit the investment universe, and can incorporate many types of macroeconomic concerns. It incorporates several kinds of risk constraints in order to obtain benchmarks satisfying possible central bank requirements of safety, liquidity, returns, and stability. Feedback between outcomes and decisions is easy using tools that reshape distributions and functions of the outcomes. And the model can be run on a PC-based platform. We apply the framework to several common reserves management problems focusing especially on the formulation of model equations, generation of trees and estimation of density functions of outcomes. We compare our approach to those used by many central banks and discuss advantages to our approach. Keywords Reserves management . ALM . Asset/liability . Dynamic stochastic optimizationCentral bank foreign exchange reserves risk management concerns balancing many objectives and issues, from broad macro-economy policy objectives, such as monetary policy and foreign exchange management, to micro-aspects, such as the definition of portfolio benchmarks and the evaluation of investment managers. Furthermore, constraints arising from legal, human resources, asset markets, institutional and other aspects affect the actual achievability and implementation of reserves management objectives. While the macro-economic aspects S. Claessens

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A sample-path approach to optimal position liquidation

Cited by 15 publications

References 27 publications

Optimization of Electricity Retailer's Contract Portfolio Subject to Risk Preferences

Optimization of Electricity Retailer's Contract Portfolio Subject to Risk Preferences

Portfolio optimization by minimizing conditional value-at-risk via nondifferentiable optimization

Strategic foreign reserves risk management: Analytical framework

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