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.
Authors
- Xin Zhang (ORCID: https://orcid.org/0000-0003-1359-0356)
- Shancun Liu
- Jingrui Pan
Institutions
- Beihang University (CN)
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
Funders
- National Natural Science Foundation of China