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Decision making with dynamic probabilistic forecasts

2021-06-30 · Peter Tankov, Laura Tinsi

We consider a sequential decision making process, such as renewable energy trading or electrical production scheduling, whose outcome depends on the future realization of a random factor, such as a meteorological variable. We assume that the decision maker disposes of a dynamically updated probabilistic forecast (predictive distribution) of the random factor. We propose several stochastic models for the evolution of the probabilistic forecast, and show how these models may be calibrated from ensemble forecasts, commonly provided by weather centers. We then show how these stochastic models can be used to determine optimal decision making strategies depending on the forecast updates. Applications to wind energy trading are given.

📄 PDF Abstract BibTeX arXiv:2106.16047

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Decision Makingenergy tradingSchedulingSequential Decision Making

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