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Stochastic optimization and worst-case decisions
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Gulpinar, Nalan, Rustem, Berç and Žaković, Stanislav (2007) Stochastic optimization and worst-case decisions. In: Grundel, Don and Murphey, Robert and Pardalos, Panos and Prokopyev, Oleg, (eds.) Cooperative Systems. Lecture Notes in Economics and Mathematical Systems, Volume 588 . Nova Science Publishers, Inc., pp. 317-338. ISBN 9783540482703
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Official URL: http://dx.doi.org/10.1007/978-3-540-48271-0_19
Abstract
In this chapter, we are concerned with decision making methods for dynamic systems under uncertainty. We consider expected value optimization of stochastic systems and worst-case robust strategies. Stochastic decision-making involves uncertainty and consequently risk. An important tool to address the inherent error for forecasting uncertainty is worst-case analysis. From the risk management point of view, minimax yields the best strategy determined simultaneously with the worst state of the underlying system. Worst-case analysis is a robust framework for decisions under uncertainty as the actual performance of the decision has a noninferiority property. The significance of robust strategies is increasingly recognized as attitudes towards risk evolve in diverse areas. We present worst-case approach to macroeconomics policy making and financial portfolio management.
| Item Type: | Book Item | ||||
|---|---|---|---|---|---|
| Subjects: | Q Science > QA Mathematics | ||||
| Divisions: | Faculty of Social Sciences > Warwick Business School > Operational Research & Management Sciences Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Decision making, Risk | ||||
| Series Name: | Lecture Notes in Economics and Mathematical Systems | ||||
| Journal or Publication Title: | Stochastic Optimization and Worst-case Decisions - Cooperative Systems : Control and Optimization | ||||
| Publisher: | Nova Science Publishers, Inc. | ||||
| ISBN: | 9783540482703 | ||||
| ISSN: | 0075-8442 | ||||
| Book Title: | Cooperative Systems | ||||
| Editor: | Grundel, Don and Murphey, Robert and Pardalos, Panos and Prokopyev, Oleg | ||||
| Official Date: | 2007 | ||||
| Dates: |
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| Volume: | Volume 588 | ||||
| Number of Pages: | 21 | ||||
| Page Range: | pp. 317-338 | ||||
| DOI: | 10.1007/978-3-540-48271-0_19 | ||||
| Status: | Peer Reviewed | ||||
| Publication Status: | Published | ||||
| Access rights to Published version: | Restricted or Subscription Access | ||||
| Funder: | Air Force Research Laboratory (Wright-Patterson Air Force Base, Ohio) (AFRL), University of Florida. College of Engineering |
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