Please use this identifier to cite or link to this item:
http://bura.brunel.ac.uk/handle/2438/7479
Title: | Processing second-order stochastic dominance models using cutting-plane representations |
Authors: | Fabian, CI Mitra, G Roman, D |
Keywords: | Stochastic programming;Convex programming;Portfolio theory;Numerical methods;Statistical methods |
Issue Date: | 2011 |
Publisher: | Springer-Verlag |
Citation: | Mathematical Programming, 130(1): 33 - 57, Nov 2011 |
Abstract: | Second-order stochastic dominance (SSD) is widely recognised as an important decision criterion in portfolio selection. Unfortunately, stochastic dominance models are known to be very demanding from a computational point of view. In this paper we consider two classes of models which use SSD as a choice criterion. The first, proposed by Dentcheva and Ruszczyński (J Bank Finance 30:433–451, 2006), uses a SSD constraint, which can be expressed as integrated chance constraints (ICCs). The second, proposed by Roman et al. (Math Program, Ser B 108:541–569, 2006) uses SSD through a multi-objective formulation with CVaR objectives. Cutting plane representations and algorithms were proposed by Klein Haneveld and Van der Vlerk (Comput Manage Sci 3:245–269, 2006) for ICCs, and by Künzi-Bay and Mayer (Comput Manage Sci 3:3–27, 2006) for CVaR minimization. These concepts are taken into consideration to propose representations and solution methods for the above class of SSD based models. We describe a cutting plane based solution algorithm and outline implementation details. A computational study is presented, which demonstrates the effectiveness and the scale-up properties of the solution algorithm, as applied to the SSD model of Roman et al. (Math Program, Ser B 108:541–569, 2006). |
Description: | This is the post-print version of the Article. The official published version can be accessed from the links below. Copyright @ 2011 Springer-Verlag |
URI: | http://link.springer.com/article/10.1007%2Fs10107-009-0326-1# http://bura.brunel.ac.uk/handle/2438/7479 |
DOI: | http://dx.doi.org/10.1007/s10107-009-0326-1 |
ISSN: | 0025-5610 |
Appears in Collections: | Publications Dept of Mathematics Research Papers Mathematical Sciences |
Files in This Item:
File | Description | Size | Format | |
---|---|---|---|---|
Fulltext.pdf | 272.46 kB | Adobe PDF | View/Open |
Items in BURA are protected by copyright, with all rights reserved, unless otherwise indicated.