Robust Learning via Nested Distributionally Robust Optimization

Distributionally Robust Optimization (DRO) is widely used to improve model robustness, with existing methods addressing either geometric perturbations (e.g., input shifts) or statistical contamination (e.g., heavy-tailed noise and outliers) effectively. However, these uncertainty sources often co-exist, and coupling them through a single divergence or optimal transport constraint conflates geometric displacement with loss-based outlierness, frequently discarding informative high-leverage samples. We introduce nested DRO, a bilevel formulation that combines an outer optimistic $\phi$-divergence cleaning step with an inner pessimistic optimal-transport robustification step, thereby decoupling geometric smoothing from statistical cleaning. We prove that this structure naturally induces a geometry-invariant, loss-based reweighting mechanism that separates outlier suppression from transport-induced regularization. We derive a tractable strong dual for the resulting non-convex problem and show its equivalence to variance-regularized risk minimization, leading to a clear statistical interpretation of the induced weights. Empirical results on synthetic and real datasets demonstrate that nested DRO consistently outperforms geometry-coupled DRO baselines, particularly under heavy-tailed contamination where preserving high-leverage structure is crucial.