Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - A heuristic for moment-matching scenario generation
AU - Høyland, Kjetil
AU - Kaut, Michal
AU - Wallace, S W
PY - 2003/2
Y1 - 2003/2
N2 - In stochastic programming models we always face the problem of how to represent the random variables. This is particularly difficult with multidimensional distributions. We present an algorithm that produces a discrete joint distribution consistent with specified values of the first four marginal moments and correlations. The joint distribution is constructed by decomposing the multivariate problem into univariate ones, and using an iterative procedure that combines simulation, Cholesky decomposition and various transformations to achieve the correct correlations without changing the marginal moments.With the algorithm, we can generate 1000 one-period scenarios for 12 random variables in 16 seconds, and for 20 random variables in 48 seconds, on a Pentium III machine.
AB - In stochastic programming models we always face the problem of how to represent the random variables. This is particularly difficult with multidimensional distributions. We present an algorithm that produces a discrete joint distribution consistent with specified values of the first four marginal moments and correlations. The joint distribution is constructed by decomposing the multivariate problem into univariate ones, and using an iterative procedure that combines simulation, Cholesky decomposition and various transformations to achieve the correct correlations without changing the marginal moments.With the algorithm, we can generate 1000 one-period scenarios for 12 random variables in 16 seconds, and for 20 random variables in 48 seconds, on a Pentium III machine.
KW - stochastic programming
KW - scenario tree generation
KW - Cholesky decomposition
KW - heuristics
U2 - 10.1023/A:1021853807313
DO - 10.1023/A:1021853807313
M3 - Journal article
VL - 24
SP - 169
EP - 185
JO - Computational Optimization and Applications
JF - Computational Optimization and Applications
SN - 0926-6003
IS - 2-3
ER -