Article ID: | iaor20104027 |
Volume: | 58 |
Issue: | 2 |
Start Page Number: | 470 |
End Page Number: | 485 |
Publication Date: | Mar 2010 |
Journal: | Operations Research |
Authors: | Sun Jie, Teo Chung-Piaw, Sim Melvyn, Chen Wenqing |
Keywords: | chance-constrained optimisation, value at risk |
We review and develop different tractable approximations to individual chance-constrained problems in robust optimization on a variety of uncertainty sets and show their interesting connections with bounds on the conditional-value-at-risk (CVaR) measure. We extend the idea to joint chance-constrained problems and provide a new formulation that improves upon the standard approach. Our approach builds on a classical worst-case bound for order statistics problems and is applicable even if the constraints are correlated. We provide an application of the model on a network resource allocation problem with uncertain demand.