A two-stage stochastic integer programming approach as a mixture of Branch-and-Fix Coordination and Benders Decomposition schemes

We present an algorithmic approach for solving two-stage stochastic mixed 0-1 problems. The first stage constraints of the Deterministic Equivalent Model have 0-1 variables and continuous variables. The approach uses the Twin Node Family (TNF) concept within the so-called Branch-and-Fix Coordination algorithmic framework to satisfy the nonanticipativity constraints, jointly with a Benders Decomposition scheme to solve a given LP model at each TNF integer set. As a pilot case, the structuring of a portfolio of Mortgage-Backed Securities under uncertainty in the interest rate path on a given time horizon is used. Some computational experience is reported.