Algorithms for Worst-Case Design and Applications to Risk Management
By Berç Rustem and Melendres Howe
3/5
()
About this ebook
Recognizing that robust decision making is vital in risk management, this book provides concepts and algorithms for computing the best decision in view of the worst-case scenario. The main tool used is minimax, which ensures robust policies with guaranteed optimal performance that will improve further if the worst case is not realized. The applications considered are drawn from finance, but the design and algorithms presented are equally applicable to problems of economic policy, engineering design, and other areas of decision making.
Critically, worst-case design addresses not only Armageddon-type uncertainty. Indeed, the determination of the worst case becomes nontrivial when faced with numerous--possibly infinite--and reasonably likely rival scenarios. Optimality does not depend on any single scenario but on all the scenarios under consideration. Worst-case optimal decisions provide guaranteed optimal performance for systems operating within the specified scenario range indicating the uncertainty. The noninferiority of minimax solutions--which also offer the possibility of multiple maxima--ensures this optimality.
Worst-case design is not intended to necessarily replace expected value optimization when the underlying uncertainty is stochastic. However, wise decision making requires the justification of policies based on expected value optimization in view of the worst-case scenario. Conversely, the cost of the assured performance provided by robust worst-case decision making needs to be evaluated relative to optimal expected values.
Written for postgraduate students and researchers engaged in optimization, engineering design, economics, and finance, this book will also be invaluable to practitioners in risk management.
Related to Algorithms for Worst-Case Design and Applications to Risk Management
Related ebooks
Extensions of Linear-Quadratic Control, Optimization and Matrix Theory Rating: 0 out of 5 stars0 ratingsControl Theoretic Splines: Optimal Control, Statistics, and Path Planning Rating: 5 out of 5 stars5/5Probability Methods for Approximations in Stochastic Control and for Elliptic Equations Rating: 0 out of 5 stars0 ratingsAverage Case Analysis of Algorithms on Sequences Rating: 0 out of 5 stars0 ratingsNumerical Solution of Differential Equations Rating: 5 out of 5 stars5/5Optimization Algorithms on Matrix Manifolds Rating: 4 out of 5 stars4/5Robust Optimization Rating: 5 out of 5 stars5/5Practical Data Analysis in Chemistry Rating: 5 out of 5 stars5/5Data Analysis for Scientists and Engineers Rating: 0 out of 5 stars0 ratingsInterior Point Algorithms: Theory and Analysis Rating: 0 out of 5 stars0 ratingsOptimal Transport Methods in Economics Rating: 5 out of 5 stars5/5A Posteriori Error Estimation in Finite Element Analysis Rating: 0 out of 5 stars0 ratingsIndependent Component Analysis Rating: 4 out of 5 stars4/5Introduction to the Numerical Solution of Markov Chains Rating: 0 out of 5 stars0 ratingsLambda-Matrices and Vibrating Systems Rating: 3 out of 5 stars3/5Financial Derivatives in Theory and Practice Rating: 4 out of 5 stars4/5Dynamic Programming and Its Application to Optimal Control Rating: 0 out of 5 stars0 ratingsRadar Systems, Peak Detection and Tracking Rating: 5 out of 5 stars5/5Nonlinear Microwave Circuit Design Rating: 0 out of 5 stars0 ratingsOptimal Seismic Deconvolution: An Estimation-Based Approach Rating: 0 out of 5 stars0 ratingsIntroduction to Discrete Dynamical Systems and Chaos Rating: 0 out of 5 stars0 ratingsThe Probability Lifesaver: All the Tools You Need to Understand Chance Rating: 5 out of 5 stars5/5Hölder Continuous Euler Flows in Three Dimensions with Compact Support in Time: (AMS-196) Rating: 0 out of 5 stars0 ratingsAn Introduction to the Mathematics of Financial Derivatives Rating: 5 out of 5 stars5/5Finite Element Methods for Viscous Incompressible Flows: A Guide to Theory, Practice, and Algorithms Rating: 0 out of 5 stars0 ratingsEngineering Optimization: An Introduction with Metaheuristic Applications Rating: 0 out of 5 stars0 ratingsSubband Adaptive Filtering: Theory and Implementation Rating: 0 out of 5 stars0 ratingsThermal Convection: Patterns, Evolution and Stability Rating: 0 out of 5 stars0 ratingsDecomposition of Multivariate Probabilities Rating: 0 out of 5 stars0 ratingsIntroduction to Random Signals and Noise Rating: 0 out of 5 stars0 ratings
Mathematics For You
Algebra - The Very Basics Rating: 5 out of 5 stars5/5Basic Math & Pre-Algebra For Dummies Rating: 4 out of 5 stars4/5Introducing Game Theory: A Graphic Guide Rating: 4 out of 5 stars4/5Mental Math Secrets - How To Be a Human Calculator Rating: 5 out of 5 stars5/5Game Theory: A Simple Introduction Rating: 4 out of 5 stars4/5Algebra I Workbook For Dummies Rating: 3 out of 5 stars3/5Calculus For Dummies Rating: 4 out of 5 stars4/5Geometry For Dummies Rating: 5 out of 5 stars5/5Basic Math Notes Rating: 5 out of 5 stars5/5Quantum Physics for Beginners Rating: 4 out of 5 stars4/5The Everything Guide to Algebra: A Step-by-Step Guide to the Basics of Algebra - in Plain English! Rating: 4 out of 5 stars4/5ACT Math & Science Prep: Includes 500+ Practice Questions Rating: 3 out of 5 stars3/5My Best Mathematical and Logic Puzzles Rating: 5 out of 5 stars5/5The Everything Everyday Math Book: From Tipping to Taxes, All the Real-World, Everyday Math Skills You Need Rating: 5 out of 5 stars5/5The Golden Ratio: The Divine Beauty of Mathematics Rating: 5 out of 5 stars5/5The Elements of Euclid for the Use of Schools and Colleges (Illustrated) Rating: 0 out of 5 stars0 ratingsRelativity: The special and the general theory Rating: 5 out of 5 stars5/5See Ya Later Calculator: Simple Math Tricks You Can Do in Your Head Rating: 4 out of 5 stars4/5The Thirteen Books of the Elements, Vol. 1 Rating: 0 out of 5 stars0 ratingsA Mind for Numbers | Summary Rating: 4 out of 5 stars4/5GED® Math Test Tutor, 2nd Edition Rating: 0 out of 5 stars0 ratingsHow Not To Be Wrong | Summary Rating: 5 out of 5 stars5/5Calculus Made Easy Rating: 4 out of 5 stars4/5The Little Book of Mathematical Principles, Theories & Things Rating: 3 out of 5 stars3/5Is God a Mathematician? Rating: 4 out of 5 stars4/5Algebra I For Dummies Rating: 4 out of 5 stars4/5
Reviews for Algorithms for Worst-Case Design and Applications to Risk Management
1 rating1 review
- Rating: 3 out of 5 stars3/5good