Mean variance optimization of non-linear systems and worst-case analysis

  • In this paper, we consider expected value, variance and worst-case optimization of nonlinear models. We present algorithms for computing optimal expected values, and variance, based on iterative Taylor expansions. We establish convergence and consider the relative merits of policies beaded on expected value optimization and worst-case robustness. The latter is a minimax strategy and ensures optimal cover in view of the worst-case scenario(s) while the former is optimal expected performance in a stochastic setting. Both approaches are used with a macroeconomic policy model to illustrate relative performances, robustness and trade-offs between the strategies. Klassifikation: C61, E43

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Author:Panos Parpas, Berc Rustem, Volker WielandORCiDGND, Stan Zakovic
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2006,03
Series (Serial Number):CFS working paper series (2006, 03)
Document Type:Working Paper
Year of Completion:2006
Year of first Publication:2006
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2006/05/04
GND Keyword:Nichtlineares mathematisches Modell
Issue:January 13, 2006
Page Number:42
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht