Wasserstein Distributionally Robust Optimization with Expected Value Constraints

Abstract: We investigate a stochastic program with expected value constraints, addressing the problem in a general context through Distributionally Robust Optimization (DRO) approach using Wasserstein distances, where the ambiguity set depends on the decision variable. We demonstrate that this approach can be reformulated into a finite-dimensional optimization problem, which, in certain instances, can be convex. Moreover, we establish criteria for determining the feasibility of the problem concerning the Wasserstein radius and the parameter governing the constraint. Finally, we present numerical results within the context of portfolio optimization. In particular, we highlight the distinctions between our approach and several existing non-robust methods, using both simulated data and real financial market data.