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 so-called Branch-and-Fix Coordination algorithmic framework to satisfy the nonanticipativity constraints, jointly with a Benders Decomposition scheme to solve a given LP model at each TNF integer set. As a pilot case, the structuring of a portfolio of Mortgage-Backed Securities under uncertainty in the interest rate path on a given time horizon is used. Some computational experience is reported.
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Escudero, L.F., Garín, A., Merino, M. et al. A two-stage stochastic integer programming approach as a mixture of Branch-and-Fix Coordination and Benders Decomposition schemes. Ann Oper Res 152, 395–420 (2007). https://doi.org/10.1007/s10479-006-0138-0
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DOI: https://doi.org/10.1007/s10479-006-0138-0