Contextual Distributionally Robust Optimization with Causal and Continuous Structure
Organizations: School of Artificial Intelligence The Chinese University of Hong Kong, Shenzhen Shenzhen, 518172, China · School of Artificial Intelligence, School of Data Science The Chinese University of Hong Kong, Shenzhen Shenzhen, 518172, China
Abstract
We propose a framework for contextual distributionally robust optimization (DRO) that considers the causal and continuous structure of the underlying distribution, and we develop an interpretable and tractable decision rule. We first introduce the causal Sinkhorn discrepancy (CSD), an entropy-regularized causal Wasserstein distance that encourages continuous transport plans while preserving causal consistency. We then formulate a contextual DRO model with a CSD-based ambiguity set, termed Causal Sinkhorn DRO (Causal-SDRO), and derive its strong dual reformulation, where the worst-case distribution is characterized as a mixture of Gibbs distributions. To obtain an (infinite-dimensional) optimal policy, we propose a soft regression forest (SRF) decision rule: it preserves the interpretability of classical decision trees while being fully parametric, differentiable, and Lipschitz-smooth, enabling intrinsic interpretation from both global and local perspectives. To solve the Causal-SDRO with parametric decision rules, we develop an efficient stochastic compositional gradient algorithm that converges to an -stationary point at a rate of , matching that of standard stochastic gradient descent. Finally, we validate our method through numerical experiments on synthetic and real-world datasets, demonstrating its superior performance and interpretability.
Figures & tables
| Methods | Average Loss | Sharpe | Mean | stdDev | CVaR | |
|---|---|---|---|---|---|---|
| 1 | PT | 0.468 | 4.125 | 0.176 | 0.784 | 1.971 |
| EW | 1.425 | 1.163 | 0.068 | 1.195 | 2.450 | |
| MV | 1.009 | 1.578 | 0.072 | 1.008 | 1.971 | |
| CMV | 0.984 | 1.156 | 0.061 | 1.003 | 2.108 | |
| 1-Causal-SDRO | 0.950 | 1.352 | 0.067 | 0.985 | 2.004 | |
| 2-Causal-SDRO | 0.925 | 1.559 | 0.081 | 0.978 | 1.965 |
Appendix figures & tables4 assets
Supplementary material from the paper’s appendix.