Robust portfolio selection problem under temperature uncertainty

Gülpınar, Nalân; Çanakoğlu, Ethem

doi:10.1016/j.ejor.2016.05.046

Cited by 30 publications

(7 citation statements)

References 43 publications

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“…In this study, we use Bertsimas and Sim robust counterpart formulation. The important advantages of this formulation over other two models can be summarized as follows [15]: 1. The model of Soyster is extremely conservative and its objective function values are much worse than those given by the nominal linear optimization model.…”

mentioning

confidence: 99%

Application of robust optimization for a product portfolio problem using an invasive weed optimization algorithm

Goli¹,

Zare²,

Tavakkoli–Moghaddam³

et al. 2019

Numerical Algebra, Control &Amp; Optimization

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Product portfolio optimization (PPO) is a strategic decision for many organizations. There are several technical methods for facilitating this decision. According to the reviewed studies, the implementation of the robust optimization approach and the invasive weed optimization (IWO) algorithm is the research gap in this field. The contribution of this paper is the development of the PPO problem with the help of the robust optimization approach and the multi-objective IWO algorithm. Considering the profit margin uncertainty in real-world investment decisions, the robust optimization approach is used to address this issue. To illustrate the real-world applicability of the model, it is implemented for dairy products of Pegah Golpayegan Company in Iran. The numerical results obtained from the IWO algorithm demonstrate the effectiveness of the proposed algorithm in tracing out the efficiency frontier of the product portfolio. The average risk of efficient frontier solutions in the deterministic model is about 0.4 and for the robust counterpart formulation is at least 0.5 per product. The efficient frontier solutions obtained from robust counterpart formulation demonstrate a more realistic risk level than the deterministic model. The comparisons between CPLEX, IWO and genetic algorithm (GA) shows that the performance of the IWO algorithm is much better than the older algorithms and can be considered as an alternative to algorithms, such as GA in product portfolio optimization problems.

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mentioning

confidence: 99%

Application of robust optimization for a product portfolio problem using an invasive weed optimization algorithm

Goli¹,

Zare²,

Tavakkoli–Moghaddam³

et al. 2019

Numerical Algebra, Control &Amp; Optimization

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show abstract

“…If the Hipster Effect is false, then alternative risk premia can be generated as follows: Analysed and introduced portfolio selection models [101,[114][115][116][117][118][119][120][121][122][123][124][125][126][127][128][129], but most of these models do not consider and are not consistent with either the Hipster Effect or similar behavioural patterns among investors or corporate executives (such as those mentioned in the literature review herein and above 2 ). These portfolio selection models are subject to the critiques and are invalidated by [9] (invalidity of the meanvariance framework in portfolio analysis) and [35][36][37][38] (biases in returns; asset pricing errors; WTAL; framing effects; intertemporal substitution; invalidity of risk aversion and loss aversion; etc.).…”

Section: Generating Alternative Risk Premia If the Hipster Effect Is ...mentioning

confidence: 99%

Complex systems and ‘‘ Spatio ‐Temporal Anti‐Compliance Coordination ’’ In cyber‐physical networks: A critique of the Hipster Effect , bankruptcy prediction and alternative risk premia

Nwogugu

2021

Cognitive Comp and Systems

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The Hipster Effect is a group of evolutionary ''Diffusive Learning'' processes of networks of individuals and groups (and their communication devices) that form Cyber-Physical Systems; and the Hipster Effect theory has potential applications in many fields of research. This study addresses decision-making parameters in machine-learning algorithms, and more specifically, critiques the explanations for the Hipster Effect, and discusses the implications for portfolio management and corporate bankruptcy prediction (two areas where AI has been used extensively). The methodological approach in this study is entirely theoretical analysis. The main findings are as follows: (i) the Hipster Effect theory and associated mathematical models are flawed; (ii) some decision-making and learning models in machine-learning algorithms are flawed; (iii) but regardless of whether or not the Hipster Effect theory is correct, it can be used to develop portfolio management models, some of which are summarised herein; (iv) the [1] corporate bankruptcy prediction model can also be used for portfolio-selection (stocks and bonds).

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“…Many researchers have studied the use of financial means to manage weather risks [17][18][19]. These include insurance, and weather derivatives based on futures, options, and other financial instruments.…”

Section: Literature Reviewmentioning

confidence: 99%

An Actuarial Pricing Method for Air Quality Index Options

Liu

Zhao

Wang

et al. 2019

IJERPH

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Poor air quality has a negative impact on social life and economic production activities. Using financial derivatives to hedge risks is one of the important methods. Air quality index (AQI) options are designed to help enterprises cope with the operational risk caused by air pollution. First, the expanded Ornstein–Uhlenbeck model is established using an autoregressive-generalized autoregressive conditional heteroscedasticity (AR-GARCH) method to predict AQI for a city. Next, the average AQI is constructed to be as the underlying index for the AQI options. We then priced AQI options using an actuarial method with an Esscher transform. Meanwhile payoff functions for the options are established to let enterprises hedge against the operational risk caused by air pollution. Finally, we determined the price of AQI options using data from Xi’an, China, and the example of a tourism enterprise as a case study of how AQI options can be applied to hedge against operational risk for enterprises. With AQI options trading, enterprises can hedge against operational risks caused by air pollution. The applicability of AQI options is wide, it can also be applied in other cities or regions.

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Robust portfolio selection problem under temperature uncertainty

Cited by 30 publications

References 43 publications

Application of robust optimization for a product portfolio problem using an invasive weed optimization algorithm

Application of robust optimization for a product portfolio problem using an invasive weed optimization algorithm

Complex systems and ‘‘ Spatio ‐Temporal Anti‐Compliance Coordination ’’ In cyber‐physical networks: A critique of the Hipster Effect , bankruptcy prediction and alternative risk premia

An Actuarial Pricing Method for Air Quality Index Options

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