On Risk Measures in Stochastic Programs
نویسندگان
چکیده
The paper considers modeling of risk-averse preferences in (multi-stage) stochastic programming problems using risk measures. We utilize the axiomatic foundation of coherent risk measures and deviation measures in order to develop simple representations for these measures that facilitate their incorporation into stochastic programs. It is demonstrated that the developed representations allow for construction of coherent risk measures that are consistent with the second order stochastic dominance. As an illustration of the general approach, we consider a two-stage stochastic Weapon-Target Assignment problem, where a coherent risk measure is used to capture the risk of the second-stage (recourse) action.
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