Tuning the Unified Robust Model of Uncertain Linear Programs: An Application to Portfolio Selection

This paper reformulates the unified robus t model and reveals therelationship between uncertainty sets using norm bodie s and their correspondingrobust counterparts defined by dual norms. it show s how to app ly a unified robustmodeling approach to portfolio selection . it is shown how the robust model of anuncertain portfolio se lection can be adjusted according to the deci sion maker' s utilityfunction and the uncertainty of the return parameters. the model can be tuned bychoosing an appropriate norm body and the radius of the uncertainty region .simulation experiments have been carried out using 10000 samples of the returnparameters for vario us lp -norm solutions. the computational results provide somegeneral guidelines as how to choose a suitable lp -norm in the unified robust modelaccording to the degree of risk aversion of an investor. in addition, when theuncertainty is large , the inves tor personality does not play an important role and loc normis the choice.