Distributionally robust optimization with polynomial densities: theory, models and algorithms
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Publication:2189441
DOI10.1007/S10107-019-01429-5zbMATH Open1467.90030DBLPjournals/mp/KlerkKP20arXiv1805.03588OpenAlexW2972299727WikidataQ88197640 ScholiaQ88197640MaRDI QIDQ2189441FDOQ2189441
Krzysztof Postek, E. de Klerk, Daniel Kuhn
Publication date: 15 June 2020
Published in: Mathematical Programming. Series A. Series B (Search for Journal in Brave)
Abstract: In distributionally robust optimization the probability distribution of the uncertain problem parameters is itself uncertain, and a fictitious adversary, e.g., nature, chooses the worst distribution from within a known ambiguity set. A common shortcoming of most existing distributionally robust optimization models is that their ambiguity sets contain pathological discrete distribution that give nature too much freedom to inflict damage. We thus introduce a new class of ambiguity sets that contain only distributions with sum-of-squares polynomial density functions of known degrees. We show that these ambiguity sets are highly expressive as they conveniently accommodate distributional information about higher-order moments, conditional probabilities, conditional moments or marginal distributions. Exploiting the theoretical properties of a measure-based hierarchy for polynomial optimization due to Lasserre [SIAM J. Optim. 21(3) (2011), pp. 864--885], we prove that certain worst-case expectation constraints are computationally tractable under these new ambiguity sets. We showcase the practical applicability of the proposed approach in the context of a stylized portfolio optimization problem and a risk aggregation problem of an insurance company.
Full work available at URL: https://arxiv.org/abs/1805.03588
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semidefinite programminggeneralized eigenvalue problemsum-of-squares polynomialsdistributionally robust optimization
Nonconvex programming, global optimization (90C26) Semidefinite programming (90C22) Stochastic programming (90C15) Robustness in mathematical programming (90C17)
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