Smooth sample average approximation of stationary points in nonsmooth stochastic optimization and applications

Xu, Huifu and Zhang, Dali (2009) Smooth sample average approximation of stationary points in nonsmooth stochastic optimization and applications. Mathematical Programming, 119 (2), 371-401. (doi:10.1007/s10107-008-0214-0).

Record type: Article

Abstract

Inspired by a recent work by Alexander et al. (J Bank Finance 30:583–605, 2006) which proposes a smoothing method to deal with nonsmoothness in a conditional value-at-risk problem, we consider a smoothing scheme for a general class of nonsmooth stochastic problems. Assuming that a smoothed problem is solved by a sample average approximation method, we investigate the convergence of stationary points of the smoothed sample average approximation problem as sample size increases and show that w.p.1 accumulation points of the stationary points of the approximation problem are weak stationary points of their counterparts of the true problem. Moreover, under some metric regularity conditions, we obtain an error bound on approximate stationary points. The convergence result is applied to a conditional value-at-risk problem and an inventory control problem.

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