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Bounds For Two-Stage Stochastic Programs With Fixed Recourse

In: Selected Works of William T Ziemba A Memorial Volume

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  • N. C. P. Edirisinghe
  • W. T. Ziemba

Abstract

This paper develops upper and lower bounds on two-stage stochastic linear programs using limited moment information. The case considered is when both the right-hand side as well as the objective coefficients of the second stage problem are random. Random variables are allowed to have arbitrary multivariate probability distributions with bounded support. First, upper and lower bounds are obtained using first and cross moments, from which we develop bounds using only first moments. The bounds are shown to solve the respective general moment problems.

Suggested Citation

  • N. C. P. Edirisinghe & W. T. Ziemba, 2024. "Bounds For Two-Stage Stochastic Programs With Fixed Recourse," World Scientific Book Chapters, in: Leonard MacLean & Sébastien Lleo (ed.), Selected Works of William T Ziemba A Memorial Volume, chapter 4, pages 57-78, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811285530_0004
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    Keywords

    William Ziemba; Financial Planning Models; Racetrack Betting; Sports Analytics; Market Anomalies; Risk Factors;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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