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A two-stage stochastic integer programming approach

Laureano F. Escudero Bueno, María Araceli Garín Martín, María Merino Maestre and Gloria Pérez Sainz de Rozas

No 2005-01, BILTOKI from Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística)

Abstract: We present an algorithmic approach for solving two-stage stochastic mixed 0-1 problems. The first stage constraints of the Deterministic Equivalent Model have 0--1 variables and continuous variables. The approach uses the Twin Node Family (TNF) concept within the algorithmic framework so-called {Branch-and-Fix Coordination} for satisfying the {nonanticipativity} constraints, jointly with a Benders Decomposition scheme for solving a given {LP} model at each {TNF} integer set. As an illustrative case, the structuring of a portfolio of Mortgage-Backed Securities under uncertainty in the interest rate path along a given time horizon is used. Some computational experience is reported.

Keywords: two stage programming; Benders decomposition; branch-and-fix coordination (search for similar items in EconPapers)
Date: 2005
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Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain

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