Assessment of conditional value at risk (CVaR) in transmission investment using cross entropy method

Jina Kim; Jaehee Lee; Sung Kwan Joo

doi:10.1109/TD-ASIA.2009.5356862

Assessment of conditional value at risk (CVaR) in transmission investment using cross entropy method

Jina Kim^*
, Jaehee Lee
, Sung Kwan Joo

^*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution

1 Citation (Scopus)

Abstract

This paper presents a risk assessment method to measure the Conditional Value at Risk (CVaR) of a transmission expansion project using the Cross-Entropy (CE) method. In the transmission investment, there are various uncertainties such as demand, fuel costs and electricity prices. These uncertain factors can influence the future cash flow of a transmission expansion project and become risk factors for an investor. The CVaR can be used to give an investor an accurate indication of the potential losses for the transmission investment. However, the use of the Crude Monte Carlo (CMC) method in CVaR calculation requires a large computational effort to obtain reliable results. In this paper, the CE method is applied to reduce the computational effort in the CVaR calculation. A numerical example is presented to illustrate the effectiveness of the proposed CE-based CVaR method.

Original language	English
Title of host publication	Transmission and Distribution Conference and Exposition
Subtitle of host publication	Asia and Pacific, T and D Asia 2009
DOIs	https://doi.org/10.1109/TD-ASIA.2009.5356862
Publication status	Published - 2009 Dec 16
Event	Transmission and Distribution Conference and Exposition: Asia and Pacific, T and D Asia 2009 - Seoul, Korea, Republic of Duration: 2009 Oct 26 → 2009 Oct 30

Publication series

Name	Transmission and Distribution Conference and Exposition: Asia and Pacific, T and D Asia 2009

Other

Other	Transmission and Distribution Conference and Exposition: Asia and Pacific, T and D Asia 2009
Country/Territory	Korea, Republic of
City	Seoul
Period	09/10/26 → 09/10/30

Keywords

Conditional value at risk (CVaR)
Cross-entropy (CE)
Transmission investment

ASJC Scopus subject areas

Energy Engineering and Power Technology
Fuel Technology

Access to Document

10.1109/TD-ASIA.2009.5356862

Cite this

Kim, J., Lee, J., & Joo, S. K. (2009). Assessment of conditional value at risk (CVaR) in transmission investment using cross entropy method. In Transmission and Distribution Conference and Exposition: Asia and Pacific, T and D Asia 2009 Article 5356862 (Transmission and Distribution Conference and Exposition: Asia and Pacific, T and D Asia 2009). https://doi.org/10.1109/TD-ASIA.2009.5356862

Assessment of conditional value at risk (CVaR) in transmission investment using cross entropy method. / Kim, Jina; Lee, Jaehee; Joo, Sung Kwan.
Transmission and Distribution Conference and Exposition: Asia and Pacific, T and D Asia 2009. 2009. 5356862 (Transmission and Distribution Conference and Exposition: Asia and Pacific, T and D Asia 2009).

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution

Kim, J, Lee, J & Joo, SK 2009, Assessment of conditional value at risk (CVaR) in transmission investment using cross entropy method. in Transmission and Distribution Conference and Exposition: Asia and Pacific, T and D Asia 2009., 5356862, Transmission and Distribution Conference and Exposition: Asia and Pacific, T and D Asia 2009, Transmission and Distribution Conference and Exposition: Asia and Pacific, T and D Asia 2009, Seoul, Korea, Republic of, 09/10/26. https://doi.org/10.1109/TD-ASIA.2009.5356862

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title = "Assessment of conditional value at risk (CVaR) in transmission investment using cross entropy method",

abstract = "This paper presents a risk assessment method to measure the Conditional Value at Risk (CVaR) of a transmission expansion project using the Cross-Entropy (CE) method. In the transmission investment, there are various uncertainties such as demand, fuel costs and electricity prices. These uncertain factors can influence the future cash flow of a transmission expansion project and become risk factors for an investor. The CVaR can be used to give an investor an accurate indication of the potential losses for the transmission investment. However, the use of the Crude Monte Carlo (CMC) method in CVaR calculation requires a large computational effort to obtain reliable results. In this paper, the CE method is applied to reduce the computational effort in the CVaR calculation. A numerical example is presented to illustrate the effectiveness of the proposed CE-based CVaR method.",

keywords = "Conditional value at risk (CVaR), Cross-entropy (CE), Transmission investment",

author = "Jina Kim and Jaehee Lee and Joo, \{Sung Kwan\}",

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AU - Kim, Jina

AU - Lee, Jaehee

AU - Joo, Sung Kwan

PY - 2009/12/16

Y1 - 2009/12/16

N2 - This paper presents a risk assessment method to measure the Conditional Value at Risk (CVaR) of a transmission expansion project using the Cross-Entropy (CE) method. In the transmission investment, there are various uncertainties such as demand, fuel costs and electricity prices. These uncertain factors can influence the future cash flow of a transmission expansion project and become risk factors for an investor. The CVaR can be used to give an investor an accurate indication of the potential losses for the transmission investment. However, the use of the Crude Monte Carlo (CMC) method in CVaR calculation requires a large computational effort to obtain reliable results. In this paper, the CE method is applied to reduce the computational effort in the CVaR calculation. A numerical example is presented to illustrate the effectiveness of the proposed CE-based CVaR method.

AB - This paper presents a risk assessment method to measure the Conditional Value at Risk (CVaR) of a transmission expansion project using the Cross-Entropy (CE) method. In the transmission investment, there are various uncertainties such as demand, fuel costs and electricity prices. These uncertain factors can influence the future cash flow of a transmission expansion project and become risk factors for an investor. The CVaR can be used to give an investor an accurate indication of the potential losses for the transmission investment. However, the use of the Crude Monte Carlo (CMC) method in CVaR calculation requires a large computational effort to obtain reliable results. In this paper, the CE method is applied to reduce the computational effort in the CVaR calculation. A numerical example is presented to illustrate the effectiveness of the proposed CE-based CVaR method.

KW - Conditional value at risk (CVaR)

KW - Cross-entropy (CE)

KW - Transmission investment

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U2 - 10.1109/TD-ASIA.2009.5356862

DO - 10.1109/TD-ASIA.2009.5356862

M3 - Conference contribution

AN - SCOPUS:76249126539

SN - 9781424452309

T3 - Transmission and Distribution Conference and Exposition: Asia and Pacific, T and D Asia 2009

BT - Transmission and Distribution Conference and Exposition

T2 - Transmission and Distribution Conference and Exposition: Asia and Pacific, T and D Asia 2009

Y2 - 26 October 2009 through 30 October 2009

ER -

Assessment of conditional value at risk (CVaR) in transmission investment using cross entropy method

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