Advances in Decision Sciences
Volume 4 (2000), Issue 1, Pages 17-38
doi:10.1155/S117391260000002X

Stratified filtered sampling in stochastic optimization

Robert Rush1 , John M. Mulvey2 , John E. Mitchell3 and Thomas R. Willemain3

1Investment policy and Research Group, John Hancok Mutual Life Insurance Company, boston, massachusetts, USA
 2Princeton University Princeton, NJ, USA
 3Rensselaer Polytechnic Institute, Troy, New York, USA

Abstract

We develop a methodology for evaluating a decision strategy generated by a stochastic optimization model. The methodology is based on a pilot study in which we estimate the distribution of performance associated with the strategy, and define an appropriate stratified sampling plan. An algorithm we call filtered search allows us to implement this plan efficiently. We demonstrate the approach's advantages with a problem in asset / liability management for an insurance company.