{"title":"Monotone Approximation of Decision Problems","authors":"Naveed Chehrazi, Thomas A. Weber","doi":"10.2139/ssrn.1324024","DOIUrl":null,"url":null,"abstract":"Many decision problems exhibit structural properties in the sense that the objective function is a composition of different component functions that can be identified using empirical data. We consider the approximation of such objective functions, subject to general monotonicity constraints on the component functions. Using a constrained B-spline approximation, we provide a data-driven robust optimization method for environments that can be sample-sparse. The method, which simultaneously identifies and solves the decision problem, is illustrated for the problem of optimal debt settlement in the credit-card industry.","PeriodicalId":315176,"journal":{"name":"Banking & Insurance","volume":"43 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2010-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"24","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Banking & Insurance","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.1324024","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 24
Abstract
Many decision problems exhibit structural properties in the sense that the objective function is a composition of different component functions that can be identified using empirical data. We consider the approximation of such objective functions, subject to general monotonicity constraints on the component functions. Using a constrained B-spline approximation, we provide a data-driven robust optimization method for environments that can be sample-sparse. The method, which simultaneously identifies and solves the decision problem, is illustrated for the problem of optimal debt settlement in the credit-card industry.