Wei Liu

In this paper, a distributionally robust optimization model based on kernel density estimation (KDE) and mean entropic value-at-risk (EVaR) is proposed, where the ambiguity set is defined as a KDE-[ ]-divergence “ball” centered at the empirical distribution in the weighted KDE distribution function family, which is a finite-dimensional set. Instead of the joint probability distribution of the random vector, the one-dimensional probability distribution of the random loss function is approximated by the univariate weighted KDE for dimensionality reduction. Under the mild conditions of the kernel and [ ]-divergence function, the computationally tractable reformulation of the corresponding distributionally robust mean-EVaR optimization model is derived by Fenchel’s duality theory. Convergence of the optimal value and the solution set of the distributionally robust optimization problem based on KDE and mean-EVaR to those of the corresponding stochastic programming problem with the true distribution is proved. For some special cases, including portfolio selection, newsvendor problem, and linear two-stage stochastic programming problem, concrete tractable reformulations are given. Primary empirical test results for portfolio selection and project management problems show that the proposed model is promising.Funding: This work was funded by the National Natural Science Foundation of China [Grants 11971092 and 11571061] and the Fundamental Research Funds for the Central Universities [Grants DUT15RC(3)037 and DUT18RC(4)067].

The tail risk management is of great significance in the investment process. As an extension of the asymmetric tail risk measure—Conditional Value at Risk (CVaR), higher moment coherent risk (HMCR) is compatible with the higher moment information (skewness and kurtosis) of probability distribution of the asset returns as well as capturing distributional asymmetry. In order to overcome the difficulties arising from the asymmetry and ambiguity of the underlying distribution, we propose the Wasserstein distributionally robust mean-HMCR portfolio optimization model based on the kernel smoothing method and optimal transport, where the ambiguity set is defined as a Wasserstein “ball” around the empirical distribution in the weighted kernel density estimation (KDE) distribution function family. Leveraging Fenchel’s duality theory, we obtain the computationally tractable DCP (difference-of-convex programming) reformulations and show that the ambiguity version preserves the asymmetry of the HMCR measure. Primary empirical test results for portfolio selection demonstrate the efficiency of the proposed model.

We introduce and investigate the coordinated log-$ h $-convexity for interval-valued functions. Also, we prove some new Jensen type inequalities and Hermite-Hadamard type inequalities, which generalize some known results in the literature. Moreover, some examples are given to illustrate our results.