Publication

Portfolio optimization of hydroelectric assets subject to financial indicators

2007
Conference Papers

Abstract

The objective of this article is to present a benchmarking of financial indicators implemented in hydroelectric stochastic risk management models. We present three model formulations using a tree approach for hydroelectric optimization using three procedures for financial risk control: Minimum Revenues (Rmin), Value-at-Risk (VaR) and Conditional VaR (CVaR). According to their properties and their formulation in each model we compare them theoretically based on two criteria: their adequacy for electricity portfolio optimization subject to risk constraints and the feasibility of their implementation inside the state of the art (SDDP) algorithm appropriate for large scale energy systems. Using numerical examples we verify the statements derived from the theoretical comparison.

Official source

https://infoscience.epfl.ch/entities/publication/759e7339-8c86-44cd-bcfc-9f045f570d89

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2007
Conference Papers

Abstract

Official source

https://infoscience.epfl.ch/entities/publication/759e7339-8c86-44cd-bcfc-9f045f570d89

About this result

Related concepts (32)

Entropic value at risk

In financial mathematics and stochastic optimization, the concept of risk measure is used to quantify the risk involved in a random outcome or risk position. Many risk measures have hitherto been proposed, each having certain characteristics. The entropic value at risk (EVaR) is a coherent risk measure introduced by Ahmadi-Javid, which is an upper bound for the value at risk (VaR) and the conditional value at risk (CVaR), obtained from the Chernoff inequality. The EVaR can also be represented by using the concept of relative entropy.

Value at risk

Value at risk (VaR) is a measure of the risk of loss of investment/Capital. It estimates how much a set of investments might lose (with a given probability), given normal market conditions, in a set time period such as a day. VaR is typically used by firms and regulators in the financial industry to gauge the amount of assets needed to cover possible losses. For a given portfolio, time horizon, and probability p, the p VaR can be defined informally as the maximum possible loss during that time after excluding all worse outcomes whose combined probability is at most p.

Expected shortfall

Expected shortfall (ES) is a risk measure—a concept used in the field of financial risk measurement to evaluate the market risk or credit risk of a portfolio. The "expected shortfall at q% level" is the expected return on the portfolio in the worst of cases. ES is an alternative to value at risk that is more sensitive to the shape of the tail of the loss distribution. Expected shortfall is also called conditional value at risk (CVaR), average value at risk (AVaR), expected tail loss (ETL), and superquantile.

Related publications (19)

Portfolio optimization of hydroelectric assets subject to financial indicators

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