Building a stochastic programming model from scratch: a harvesting management example. Issue 2 (1st February 2016)

• Record Type: Journal Article
• Authors: Rios, Ignacio; Weintraub, Andres; Wets, Roger J.-B.
• Is Part Of: Quantitative finance. Volume 16:Issue 2(2016)
• Page Start: 189
• Page End: 199
• Publication Date: 2016-02-01
• Subjects: Stochastic programming -- Scenario generation -- Scenario trees -- Stochastic evaluation; Finance -- Periodicals; Business mathematics -- Periodicals; Finance -- Mathematical models -- Periodicals; Investments -- Mathematics -- Periodicals; Economics -- Periodicals; Finances -- Modèles mathématiques -- Périodiques; 332.015118
• DOI: 10.1080/14697688.2015.1114365
• Languages: English
• ISSNs: 1469-7688

Abstract

Abstract : We analyse how to deal with the uncertainty before solving a stochastic optimization problem and we apply it to a forestry management problem. In particular, we start from historical data to build a stochastic process for wood prices and for bounds on its demand. Then, we generate scenario trees considering different numbers of scenarios and different scenario-generation methods, and we describe a procedure to compare the solutions obtained with each approach. Finally, we show that the scenario tree used to obtain a candidate solution has a considerable impact in our decision model.