The objective of this paper is to combine a real options framework with portfolio optimization techniques and to apply this new framework to investments in the electricity sector. In particular, a real options model is used to assess the adoption decision of particular technologies under uncertainty. These technologies are coal-fired power plants, biomassfired power plants and onshore wind mill...

We examine the impact of adding either a VaR or a CVaR constraint to the mean–variance model when security returns are assumed to have a discrete distribution with finitely many jump points. Three main results are obtained. First, portfolios on the VaR-constrained boundary exhibit (K + 2)-fund separation, where K is the number of states for which the portfolios suffer losses equal to the VaR bo...

The world’s tenth largest river in terms of annual flow volume, the Mekong is comparatively undeveloped in terms of its exploitable water resources, so that its hydrological regime remains largely natural and unregulated. However, this is about to change given the scale of water resources schemes proposed over the next two decades. These include over 23 cubic kilometres of reservoir storage beh...

Online portfolio selection research has so far focused mainly on minimizing regret defined in terms of wealth growth. Practical financial decision making, however, is deeply concerned with both wealth and risk. We consider online learning of portfolios of stocks whose prices are governed by arbitrary (unknown) stationary and ergodic processes, where the goal is to maximize wealth while keeping ...

A new portfolio choice model in continuous time is formulated for both complete and incomplete markets, where the quantile function of the terminal cash flow, instead of the cash flow itself, is taken as the decision variable. This formulation covers a wide body of existing and new models with law-invariant preference measures, including expected utility maximisation, mean-variance, goal reachi...

The intermittent nature of the renewable energies increases the operation costs of conventional generators. As the share of energy supplied by renewable sources increases, these costs also increase. In this paper, we quantify these costs by developing a market clearing price of energy in the presence of renewable energy and congestion constraints. We consider an electricity market where generat...

This article develops a safetyanalysis method for stochastic systems that is sensitive to the possibility and severity of rare harmful outcomes. We define risk-sensitive safe sets as sublevel sets solution nonstandard optimal control problem, where random maximum cost assessed via Conditional V...

Optimization problems face random constraint violations when uncertainty arises in constraint parameters. Effective ways of controlling such violations include risk constraints, e.g., chance constraints and conditional Value-at-Risk (CVaR) constraints. This paper studies these two types of risk constraints when the probability distribution of the uncertain parameters is ambiguous. In particular...

In this paper, we study the optimal order quantity decisions for a risk-averse newsvendor with a backorder case, where it is assumed that all or part of the excess demands of the customers can be backlogged. The optimal decisions are obtained under the popular Conditional Value-at-Risk (CVaR) criterion, which is to control the risk of the profit due to uncertain market demands. We study two bas...