Distributionally robust stochastic programs with side information based on trimmings

DOI10.1007/S10107-021-01724-0MaRDI QIDQ2089796zbMATH OpenOpenAlexFDO

Authors Yanyan Li

Publication date 24 October 2022

Published in Mathematical Programming. Series A. Series B (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://arxiv.org/abs/2009.10592

zbMATH Keywords

portfolio optimizationnewsvendor problemside informationdistributionally robust optimizationpartial mass transportation problemtrimmings

Mathematics Subject Classification ID

Stochastic programming (90C15) Minimax problems in mathematical programming (90C47)

Abstract: We consider stochastic programs conditional on some covariate information, where the only knowledge of the possible relationship between the uncertain parameters and the covariates is reduced to a finite data sample of their joint distribution. By exploiting the close link between the notion of trimmings of a probability measure and the partial mass transportation problem, we construct a data-driven Distributionally Robust Optimization (DRO) framework to hedge the decision against the intrinsic error in the process of inferring conditional information from limited joint data. We show that our approach is computationally as tractable as the standard (without side information) Wasserstein-metric-based DRO and enjoys performance guarantees. Furthermore, our DRO framework can be conveniently used to address data-driven decision-making problems under contaminated samples and naturally produces distributionally robust versions of some local nonparametric predictive methods, such as Nadaraya-Watson kernel regression and $K$-nearest neighbors, which are often used in the context of conditional stochastic optimization. Finally, the theoretical results are illustrated using a single-item newsvendor problem and a portfolio allocation problem with side information.

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Cites work

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Cited in

(3)

• Contextual robust optimisation with uncertainty quantification
• Residuals-based distributionally robust optimization with covariate information
• Frameworks and results in distributionally robust optimization

Describes a project that uses

Uses Software

• GitHub

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