Conditional value-at-risk for water management in Lake Burley Griffin

Abstract

As the centrepiece of Canberra, Lake Burley Griffin provides the setting for buildings of national importance and a venue for aquatic recreation while, as part of the Molonglo River, the lake has a role in the ecological processes of its broader setting. For the purposes of recreation and landscape a constant water level is preferred: the management plan requires the lake to be maintained at a prescribed normal level. In years of low rainfall this requirement could conflict with the water demands of other users. Episodes of high rainfall may also require compromise between competing objectives. For example, drawdown of lake levels for flood mitigation could impact on the lake's recreational and amenity values and the spill may not be a good use of water. Conditional Value at Risk, a risk measure developed by the financial industry for portfolio management, is defined as the expected loss given that some loss threshold is exceeded. Here, Conditional Value at Risk is applied as decision support for strategic planning and day-to-day operational problems in the hydraulic management of Lake Burley Griffin.