The optimal harvesting problem under price uncertainty: the risk averse case

Article

DOI: 10.1007/s10479-015-1963-9

Cite this article as:
Pagnoncelli, B.K. & Piazza, A. Ann Oper Res (2015). doi:10.1007/s10479-015-1963-9
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Abstract

We study the exploitation of a one species, multiple stand forest plantation when timber price is governed by a stochastic process. Our model is a stochastic dynamic program with a weighted mean-risk objective function, and our main risk measure is the Conditional Value-at-Risk. We consider two stochastic processes, geometric Brownian motion and Ornstein–Uhlenbeck: in the first case, we completely characterize the optimal policy for all possible choices of the parameters while in the second, we provide sufficient conditions assuring that harvesting everything available is optimal. In both cases we solve the problem theoretically for every initial condition. We compare our results with the risk neutral framework and generalize our findings to any coherent risk measure that is affine on the current price.

Keywords

Multistage stochastic programming Optimal harvesting  Forestry Coherent risk measures 

Funding information

Funder NameGrant NumberFunding Note
ONICYT
  • 11130056
CONICYT
  • 11090254
CONICYT ANILLO
  • ACT1106
CONICYT REDES
  • 140183

Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.Escuela de Negocios, Universidad Adolfo IbáñezSantiagoChile
  2. 2.Departamento de MatemáticaUniversidad Técnica Federico Santa MaríaValparaisoChile

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