SC 98-23 Marc C. Steinbach: Recursive Direct Algorithms for Multistage Stochastic
Programs in Financial Engineering Appeared in: P. Kall, H.J. Lüthi (eds.). Operations Research
1998. Sel. Papers of the International Conference on
Operations Research, Zürich, 1998, pp. 241-250, Springer,
1999.
Abstract: Multistage stochastic programs can be seen as discrete
optimal control problems with a characteristic dynamic
structure induced by the scenario tree.
To exploit that structure, we propose a highly efficient
dynamic programming recursion for the computationally
intensive task of KKT systems solution within an
interior point method.
Test runs on a multistage portfolio selection problem
demonstrate the performance of the algorithm.
(only electronic version available)
Keywords: multistage stochastic programs,
discrete dynamics,
tree-sparse QP,
KKT recursion,
finance
MSC: 90C15, 90A09, 90C06, 65F50, 65F05