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Journal Articles Automatica Year : 2004

A practical implementation of stochastic programming: an application to the evaluation of option contracts in supply chains

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Abstract

Stochastic programming is a powerful analytical method in order to solve sequential decision-making problems under uncertainty. We describe an approach to build such stochastic linear programming models. We show that algebraic modeling languages make it possible for non-specialist users to formulate complex problems and have solved them by powerful commercial solvers. We illustrate our point in the case of option contracts in supply chain management and propose a numerical analysis of performance. We propose easy-to-implement discretization procedures of the stochastic process in order to limit the size of the event tree in a multi-period environment.

Dates and versions

hal-00471409 , version 1 (08-04-2010)

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Christian van Delft, Jean-Philippe Vial. A practical implementation of stochastic programming: an application to the evaluation of option contracts in supply chains. Automatica, 2004, Vol.40,n°5, pp.743-756. ⟨10.1016/j.automatica.2003.12.008⟩. ⟨hal-00471409⟩

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