Article ID: | iaor20132762 |
Volume: | 55 |
Issue: | 2 |
Start Page Number: | 341 |
End Page Number: | 377 |
Publication Date: | Jun 2013 |
Journal: | Computational Optimization and Applications |
Authors: | Li Yuying, Coleman Thomas, Moazeni Somayeh |
Keywords: | sets |
An uncertainty set is a crucial component in robust optimization. Unfortunately, it is often unclear how to specify it precisely. Thus it is important to study sensitivity of the robust solution to variations in the uncertainty set, and to develop a method which improves stability of the robust solution. In this paper, to address these issues, we focus on uncertainty in the price impact parameters in an optimal portfolio execution problem. We first illustrate that a small variation in the uncertainty set may result in a large change in the robust solution. We then propose a