A0729
Title: Robust multiobjective mean-conditional value at risk optimization: Applications to energy portfolios
Authors: Asmerilda Hitaj - University of Insubria (Italy) [presenting]
Elisa Mastrogiacomo - Insubria University (Italy)
Elena Molho - University of Pavia (Italy)
Abstract: A new approach to optimizing or hedging a portfolio of financial positions is presented and tested with applications to the energy market. Motivated by uncertainty in the estimation of problem data and by the possibly non-normal distribution of energy asset returns, robust multiobjective optimization problems are considered with mean and conditional value-at-risk objective functions where the underlying probability distribution of portfolio return is only known to belong to a certain set. To tackle the problem of uncertainty, two different approaches are considered: in the first one, uncertainty is represented by an elliptic set centred at the sample estimators of mean and covariance matrix; in the second one, uncertainty takes into account experts' beliefs. For both approaches, analytical semi-closed-form solutions are derived for the worst-case mean-CVaR portfolio; in addition, a characterization of the location is provided of the robust Pareto frontier with respect to the corresponding original Pareto frontier.
