Published: Jan 2013
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This chapter introduces concepts of financial risk as applied to the decision-making associated with refinery operations. Particular focus is given to the use of two-stage programming to make crude purchasing decisions and operational choices such as the throughput of different units. Most models consider the price as an external uncertain parameter. However, because refiners modify retail prices to optimize profit margins and inventory costs, models that include it as a decision variable are also discussed. In addition, techniques to identify decisions that are less profitable, but also less risky, are presented. Finally, we show how commercial software can be used. We conclude that the techniques presented are mature and ready to be adopted in practice.
Financial risk, optimization under uncertainty, two-stage stochastic programming, value at risk
School of Chemical, Biological, and Materials Engineering, University of Oklahoma, Norman, OK