Multistage Stochastic Integer Programming: Approximate Solution Methods and Applications

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Multistage stochastic programming (MSP) provides a modeling framework for sequential decision making under uncertainty. The majority of the application of mathematical programming assumes deterministic data. However, real world problems almost always include some uncertain parameters (e.g., in a portfolio optimization problem, the returns of different assets are highly uncertain at the time of investment). It has been traditionally difficult to predict such uncertainties with a high accuracy, but now with the existence of substantial historical records and advances in data analytics, we can accurately model uncertainty. The ability to exploit available data made it possible to incorporate uncertainty into mathematical models, which is the case in stochastic programming. Moreover, in many applications, the planning horizon has multiple decision stages and the uncertainty is revealed gradually over time. Therefore, MSP is a viable modeling approach. ******MSP has numerous applications in areas like energy, finance, and scheduling. However, MSP models are notoriously hard to solve in general, and existing solution approaches frequently fail to solve real-life size problems. Motivated by its application potential and limitations of the state-of-the-art solution methods, this program aims to make fundamental algorithmic and theoretical contributions to MSP (especially with integer variables), and extend its applications in a variety of areas.******Theme 1 of the program will focus on developing methods that can overcome modeling and algorithmic challenges in the class of MSP problems, especially the ones involving integer variables, and that can provide (provably) good feasible policies. The methodology will be mostly based on novel ways of using (linear) decision rules. In particular, new decision rules will be developed for MSP models with integer variables. The tractability of the proposed methods and the quality of the obtained solutions will be analyzed. The results will significantly advance the state-of-the-art in stochastic programming.******Theme 2 of the program will explore diverse applications of MSP such as operating room scheduling, power systems and portfolio optimization. Novel MSP models will be proposed for certain important problems in these areas, and the value of such models over deterministic and two-stage stochastic programming models will be investigated. The results will provide valuable planning, scheduling and operational tools for decision makers.