Rectangular Sets of Probability Measures
Operations Research · 2016 · Volume 64 · Issue 2
Abstract
In this paper we consider the notion of rectangularity of a set of probability measures from a somewhat different point of view. We define rectangularity as a property of dynamic decomposition of a distributionally robust stochastic optimization problem and show how it relates to the modern theory of coherent risk measures. Consequently, we discuss robust formulations of multistage stochastic optimization problems in frameworks of stochastic programming, stochastic optimal control, and Markov decision processes.
Keywords
multistage stochastic optimization, rectangularity, risk-averse optimization, robust optimal control and Markov decision processes, dynamic programming, coherent risk measures, time consistency
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