Two-Stage Distributionally Robust Optimization for an Asymmetric Loss-Aversion Portfolio via Deep Learning

In portfolio optimization, investors often overlook asymmetric preferences for gains and losses. We propose a distributionally robust two-stage portfolio optimization (DR-TSPO) model, which is suitable for scenarios where the loss reference point is adaptively updated based on prior decisions. For analytical convenience, we further reformulate the DR-TSPO model as an equivalent second-order cone programming counterpart. Additionally, we develop a deep learning-based constraint correction algorithm (DL-CCA) trained directly on problem descriptions, which enhances computational efficiency for large-scale non-convex distributionally robust portfolio optimization. Our empirical results obtained using global market data demonstrate that during COVID-19, the DR-TSPO model outperformed traditional two-stage optimization in reducing conservatism and avoiding extreme losses.

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Publication Details

Journal
Symmetry
Published
2025-08-04
DOI
https://doi.org/10.3390/sym17081236
Citations
2
Primary Topic
Risk and Portfolio Optimization
Type
article
Field-Weighted Citation Impact
4.21

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article

Two-Stage Distributionally Robust Optimization for an Asymmetric Loss-Aversion Portfolio via Deep Learning

Xin Zhang, Shancun Liu, Jingrui Pan
2 citations
Symmetry
Risk and Portfolio Optimization
4.21
article

Two-Stage Distributionally Robust Optimization for an Asymmetric Loss-Aversion Portfolio via Deep Learning

Xin Zhang, Shancun Liu, Jingrui Pan
article en
2 citations

Abstract

In portfolio optimization, investors often overlook asymmetric preferences for gains and losses. We propose a distributionally robust two-stage portfolio optimization (DR-TSPO) model, which is suitable for scenarios where the loss reference point is adaptively updated based on prior decisions. For analytical convenience, we further reformulate the DR-TSPO model as an equivalent second-order cone programming counterpart. Additionally, we develop a deep learning-based constraint correction algorithm (DL-CCA) trained directly on problem descriptions, which enhances computational efficiency for large-scale non-convex distributionally robust portfolio optimization. Our empirical results obtained using global market data demonstrate that during COVID-19, the DR-TSPO model outperformed traditional two-stage optimization in reducing conservatism and avoiding extreme losses.

SymmetryVol. 17(8)
Beihang University (CN)
National Natural Science Foundation of China
Openalex Percentile: Top 6%
Risk and Portfolio Optimization
4.21
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