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Managing financial risk in planning under uncertainty
Author(s) -
Barbaro Andres,
Bagajewicz Miguel J.
Publication year - 2004
Publication title -
aiche journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.958
H-Index - 167
eISSN - 1547-5905
pISSN - 0001-1541
DOI - 10.1002/aic.10094
Subject(s) - downside risk , financial risk , risk management , probabilistic logic , stochastic programming , financial plan , financial modeling , risk analysis (engineering) , computer science , relation (database) , actuarial science , finance , operations research , economics , engineering , business , mathematics , mathematical optimization , artificial intelligence , data mining , portfolio
A methodology is presented to include financial risk management in the framework of two‐stage stochastic programming for planning under uncertainty. A known probabilistic definition of financial risk is adapted to be used in this framework and its relation to downside risk is analyzed. Using these definitions, new two‐stage stochastic programming models that manage financial risk are presented. Computational issues related to these models are also discussed. © 2004 American Institute of Chemical Engineers AIChE J , 50: 963–989, 2004