Mathematical Methods of Operations Research

, Volume 65, Issue 2, pp 361–383 | Cite as

Adaptive discretization of convex multistage stochastic programs

Original Article

Abstract

We propose a new scenario tree reduction algorithm for multistage stochastic programs, which integrates the reduction of a scenario tree into the solution process of the stochastic program. This allows to construct a scenario tree that is highly adapted on the optimization problem. The algorithm starts with a rough approximation of the original tree and locally refines this approximation as long as necessary. Promising numerical results for scenario tree reductions in the settings of portfolio management and power management with uncertain load are presented.

Keywords

Stochastic programming Multistage Scenario tree Scenario reduction Adaptive discretization 

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Copyright information

© Springer-Verlag 2006

Authors and Affiliations

  1. 1.Department of MathematicsHumboldt-UniversityBerlinGermany
  2. 2.BerlinGermany

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