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On a time consistency concept in risk averse multi-stage stochastic programming

Alexander Shapiro(ashapiro***at***isye.gatech.edu)

Abstract: In this paper we discuss time consistency of multi-stage risk averse stochastic programming problems. We approach the concept of time consistency from an optimization point of view. That is, at each state of the system optimality of a decision policy should not involve states which cannot happen in the future. We also discuss a relation of this concept of time consistency to deriving dynamic programming equations. Finally, we argue that some risk averse approaches to multi-stage programming are time consistent while some others are not.

Keywords: Stochastic programming, time consistency, risk averse optimization, dynamic programming, coherent risk measures

Category 1: Stochastic Programming

Citation: Preprint

Download: [PDF]

Entry Submitted: 12/11/2008
Entry Accepted: 12/11/2008
Entry Last Modified: 12/11/2008

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