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Robust portfolio selection problem under temperature uncertainty
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DOI：10.1016/j.ejor.2016.05.046.png)
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Abstract
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In this paper, we consider a portfolio selection problem under temperature uncertainty. Weather derivatives based on different temperature indices are used to protect against undesirable temperature events. We introduce stochastic and robust portfolio optimization models using weather derivatives. The investors' different risk preferences are incorporated into the portfolio allocation problem. The robust investment decisions are derived in view of discrete and continuous sets that the underlying uncertain data in temperature model belong. We illustrate main features of the robust approach and performance of the portfolio optimization models using real market data. In particular, we analyze impact of various model parameters on different robust investment decisions. (C) 2016 Published by Elsevier B.V.
Keywords:
Robust investment decisions
Temperature uncertainty
Asset allocation
Weather derivatives
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