Computational Methods of Applied Probability in Business Analytics

Two-Stage Problems with Stochastic Order Constraints. Darinka Dentcheva, Department of Mathematical Science, Stevens Institute of Technology. Abstract: We consider two-stage risk-averse stochastic optimization problems with a stochastic-order constraint on the second stage decisions. The usual stochastic order, the increasing convex order and a multivariate stochastic order will be discussed. We propose decomposition methods to solve the problems and prove their convergence. Our methods exploit the decomposition structure of the risk-neutral two-stage problems and construct successive approximations of the stochastic-order constraints. Numerical results confirm the efficiency of the methods. Talk based on joint work with Eli Wolfhagen, Stevens Institute of Technology. .