Skip to main navigation Skip to search Skip to main content

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

  • Xin Zhang
  • , Shancun Liu*
  • , Jingrui Pan
  • *Corresponding author for this work
  • Beihang University

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish
Article number1236
JournalSymmetry
Volume17
Issue number8
DOIs
StatePublished - Aug 2025

Keywords

  • decision-dependent loss reference
  • deep learning algorithm
  • distributionally robust two-stage optimization
  • loss aversion
  • portfolio

Fingerprint

Dive into the research topics of 'Two-Stage Distributionally Robust Optimization for an Asymmetric Loss-Aversion Portfolio via Deep Learning'. Together they form a unique fingerprint.

Cite this