Inseparable robust reward–risk optimization models with distribution uncertainty

Zhou, Yijia; Yang, Li; Xu, Lijun; Yu, Bo

doi:10.1007/s13160-016-0230-z

Cited by 7 publications

(7 citation statements)

References 17 publications

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“…These figures are subject to risk analysis . Investors hope to either maximize the return with the given risk or minimize the risk with the given expected reward . In this study, the focus is on the first case where there is a risk associated with the biomass cost and the product market price and the objective is to meet a target annual ROI, which, in a simplified form, can be estimated via the following equation:

italicAnnual italicROI = \frac{italicGain from investment - italicCost of investment}{Cost of invesment} \times \frac{1}{n}

…”

Section: Methodsmentioning

confidence: 99%

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A novel risk analysis methodology to evaluate the economic performance of a biorefinery and to quantify the economic incentives for participating biomass producers

Wang

Ebadian

Sokhansanj

et al. 2018

Biofuels Bioprod Bioref

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In this paper, a novel risk analysis methodology is presented to evaluate the economic performance of a biorefinery given the volatility in the market price of the final product and the variability in the biomass delivered cost. In addition, potential economic incentives for participating biomass producers are quantified for different farm participation rates. The Monte Carlo simulation model, IBSAL-MC, is used to estimate the biomass delivered cost distribution, and a modified risk heat map is used to visualize the expected return on investment (ROI) for various combinations of the market price of the final product and the biomass delivered cost. The developed methodology is applied to an under-construction cellulosic sugar facility located in Sarnia, southwestern Ontario. Four farm participation rates of 20% (base-case scenario), 30%, 40% and 50% are studied. The results show that the expected annual ROI for the basecase scenario is estimated to be 1.3%. As the farm participation rate increases, the expected annual ROI increases from 1.3% at 20% farm participation rate to 3.4%, 4.6% and 5.1% at 30%, 40% and 50% rates, respectively. At high sugar market prices ($375-$525/tonne), the overall expected annual ROI increases to 9.5%, 11.4%, 12.6% and 13.0% in 20%, 30%, 40% and 50% farm participation rates, respectively. In this case, the economic incentives to share with biomass producers are estimated to be $14.10/dry tonne (dt), $15.77/dt and $16.33/dt by increasing the farm participation rate from 20% to 30%, 40% and 50%, respectively.

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italicAnnual italicROI = \frac{italicGain from investment - italicCost of investment}{Cost of invesment} \times \frac{1}{n}

…”

Section: Methodsmentioning

confidence: 99%

“…risk‐averse, risk‐seeking and risk‐neutral) and expected profits . The developed risk mitigation strategies in a supply chain can either increase the profit with a given level of risk or to reduce the level of risk with a given expected profit …”

Section: Introductionmentioning

confidence: 99%

A novel risk analysis methodology to evaluate the economic performance of a biorefinery and to quantify the economic incentives for participating biomass producers

Wang

Ebadian

Sokhansanj

et al. 2018

Biofuels Bioprod Bioref

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“…In contrary, we consider the following case without too large difference of returns in magnitude. Referring to [28,31], we test three models (57), (58), and (47) on portfolios of the two Hang Seng Index. We consider the day returns of these assets.…”

Section: Test On Portfolios Of the Two Hang Seng Indexmentioning

confidence: 99%

“…Guray Kara et al [16] used robust conditional value-at-risk (RCVaR) under parallelepiped uncertainty to find more robust portfolio allocation and reduce the risk. In addition, more and more theories and methods with incomplete messages have been studied recently in various applications (see [17][18][19][20][21][22][23][24][25][26][27][28][29] for example). In this paper, we also focus on a kind of robust models under some uncertainty set, which refer to robust ratio models with CVaR and standard deviation.…”

Section: Introductionmentioning

confidence: 99%

New Robust Reward‐Risk Ratio Models with CVaR and Standard Deviation

Zhou

2022

Journal of Mathematics

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In this paper, we present two robust reward-risk ratio optimization models. Two new models contain the worst case of not only conditional value-at-risk (CVaR), but also standard deviation (SD). Using properties of reward measure, CVaR measure, and standard deviation measure, new models can be proved to equivalent to min-max problems. When the uncertainty set is an ellipsoid, new models can be further rewritten as second-order cone problems step by step. Finally, we implement new models to portfolio problems. It shows that new models are robust and comparable with mean-CVaR ratio model. Since considering standard deviation, allocation decision obtained by new models can give reasonable rewards according to personal preferences.

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“…The implementation of the VaR models and their performance were considered by many authors, both from the theoretical and practical point of view (Kang & Li, 2018;Mogel & Auer, 2018;Trottier et al, 2018;Bee et al, 2017;D'Amico & Petroni, 2017;Djakovic & Andjelic, 2017;Goel et al, 2017;Chen & Chiang, 2016;Kambouroudis et al, 2016;Lee, 2016;Wied et al, 2016;Zhou et al, 2016). The evolution of risk management is induced by financial crises (Adrian, 2017).…”

Section: Literature Reviewmentioning

confidence: 99%

Investment Environment Problems Analysis and Evaluation: An Ex Post Empirical Analysis and Performance Implications

Djakovic

Andjelic

Petkovic³

2019

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The research subject is the investment environment problems analysis and evaluation of the developing countries, namely, the Republic of Serbia, Croatia, Slovenia, and Hungary. The analysis was carried out by testing and implementation of the Value-at-Risk models, i.e, the historical simulation (HS VaR), the delta-normal VaR (D VaR) and the extreme value theory model (EVT), with the confidence level of 95% for 100, 200 and 300 days, in the period from 2012 to 2016. The basic hypothesis of the research is that there is a relation between the successful application of the historical simulation (HS VaR), the delta-normal VaR (D VaR) and the extreme value theory model (EVT) and the conditions and opportunities of the investment environment of the developing countries. The research results provide a concrete knowledge of the conditions and circumstances of the investment environment in the observed markets, with a simultaneous performance assessment of the tested VaR models.

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Inseparable robust reward–risk optimization models with distribution uncertainty

Cited by 7 publications

References 17 publications

A novel risk analysis methodology to evaluate the economic performance of a biorefinery and to quantify the economic incentives for participating biomass producers

A novel risk analysis methodology to evaluate the economic performance of a biorefinery and to quantify the economic incentives for participating biomass producers

New Robust Reward‐Risk Ratio Models with CVaR and Standard Deviation

Investment Environment Problems Analysis and Evaluation: An Ex Post Empirical Analysis and Performance Implications

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