Implementing the conditional value at risk approach for even-flow forest management planning

Deciding upon a plan of action for a forest holding involves a significant amount of uncertainty. As forest planning involves the use and extraction of resources, uncertainty lies in both the future development of the forest (biological) and the development of the market for forest based products (economic). Additionally, natural hazards can be a source of unexpected losses. In traditional forest management planning, the most common way to deal with uncertainty is to ignore it. Growth models are used which are assumed to be correct, and timber prices are assumed to be held constant. By ignoring the fact that these models provide only one representation of what may happen, the forest owner may get a too optimistic (or pessimistic) view of the potential value of the forest holding. Through a stochastic programming formulation, these uncertainties can be modelled directly into the optimization formulation, and a management plan can be created which incorporates the risk preferences of the decision maker. This is highlighted through an example which maximizes the net present value of the holding while minimizing the conditional value at risk of obtaining a stated even-flow of income.The accepted manuscript in pdf format is listed with the files at the bottom of this page. The presentation of the authors' names and (or) special characters in the title of the manuscript may differ slightly between what is listed on this page and what is listed in the pdf file of the accepted manuscript; that in the pdf file of the accepted manuscript is what was submitted by the author