Newton-type methods for stochastic programming

Stochastic programming is concerned with practical procedures for decision making under uncertainty, by modelling uncertainties and risks associated with decision in a form suitable for optimization. The field is developing rapidly with contributions from many disciplines such as operations research, probability and statistics, and economics. A stochastic linear program with recourse can equivalently be formulated as a convex programming problem. The problem is often large-scale as the objective function involves an expectation, either over a discrete set of scenarios or as a multi-dimensional integral. Moreover, the objective function is possibly nondifferentiable. This paper provides a brief overview of recent developments on smooth approximation techniques and Newton-type methods for solving two-stage stochastic linear programs with recourse, and parallel implementation of these methods. A simple numerical example is used to signal the potential of smoothing approaches. (C) 2000 Elsevier Science Ltd. All rights reserved.