STOCHASTIC

PROGRAMMING
WHAT IS IT ???

Stochastic
(a randomly
determined
process)

A mathematical
programming but with a
stochastic element present
in the data. 

Programming
STOCHASTIC PROGRAMMING PROBLEM DETERMINISTIC PROGRAMMING PROBLEM
SOME TERMINOLOGIES :
Randomness– Apparent lack of pattern or predictability.

Random Variable- A numerical measure or representation of a random

event in a probability experiment.

Probability Distribution-
 For any event of a random experiment, we can find its corresponding probability.
For different values of the random variable, we can find its respective probability.
The values of random variables along with the corresponding probabilities are the
probability distribution of the random variable.
 Assume X is a random variable. A function P(X) is the probability distribution of X.
Any function F defined for all real x by F(x) = P(X ≤ x) is called the distribution
function of the random variable X.
 STOCHASTIC
PROGRAMMIN
G

SEQUENTIAL NON-
SEQUENTIAL
DECISION DECISION
PROBLEMS PROBLEMS
 SEQUENTIAL – These problems involve the making of two or more decisions at different points of time and it has the property of latter decisions
being influenced by not only the previous decision but also by some stochastic parameters whose value will actually be observed before latter
decisions are made.
In simple words,

It is A problem which interacts with an external entity i.e. stochastic entity (in our case) that change
with it’s behavior based on a decision is sequential in nature.

Example – A) neural machine translation (and most other NLP problems) are sequential tasks, because the
translation of a given word in a sentence does not only depend on the word itself, but also on the translation of the
previous word (e.g. whether “arm” was interpreted as limb or as weapon).

(STOCHASTIC GRADIENT DESCENT)

B) Managing a stock portfolio,

 NON-SEQUENTIAL –There is only one decision is to be made or if the problem is imagined to consist of several decisions, then it is not true that
the parameters will have an influence on latter decisions.

OR
A measurement is taken, the data is processed and and output is determined. 

Example – Image Classification ( Classifying Different Objects In An Image)

Note: Variables in a programming problem are frequently referred to as the decision variables.
APPLICATIONS

 Machine Scheduling

 Dairy Farm Expansion planning

 Macroeconomic modeling and planning

 Traffic management

 Inventory management
CHANCE-CONTSTRAINED
PROGRAMMING PROBLEM
  
 It deals with situations in which the parameters of the constraints are random

variables and the constraints are realized with a minimum probability.

Mathematically, it is defined as

subject to,
;
;
where .
EXAMPLE :
SOLUTION:
Practice Problem:
Table 1: Normal Distribution Stat Table
Table 2: Normal Distribution Stat Table(Contd.)