Browse Definitions :
Definition

stochastic optimization

Stochastic optimization is the process of maximizing or minimizing the value of a mathematical or statistical function when one or more of the input parameters is subject to randomness. The word stochastic means involving chance or probability.

 Stochastic processes are commonly involved in business analytics (BA), sales, service, manufacturing, finance and communications. Stochastic processes always involve probability, such as trying to predict the water level in a reservoir at a certain time based on random distribution of rainfall and water usage, or estimating the number of dropped connections in a communications network based on randomly variable traffic but constant available bandwidth. In contrast, deterministic processes never involve probability; outcomes occur (or fail to occur) based on predictable and exact input values. 

Stochastic optimization lends itself to real-life situations because many phenomena in the physical world involve uncertainty, imprecision or randomness. Consider the following example: A computer repair shop wants to order exactly the right number of spare parts of several different types every month to keep pace with customer demand. If the shop orders too many parts of any type from the wholesalers, money will be spent needlessly; if the shop does not order enough parts of any type, it will lose business when customers go elsewhere for service. Determining the ideal number of parts of each type to order involves stochastic optimization, because the number of customers who come in with component failures of various sorts cannot be precisely predicted. The objective is to maximize the function's output value (the shop's profit) in the face of numerous random input variables.

See also: chaos theory

This was last updated in July 2012

Continue Reading About stochastic optimization

SearchCompliance
  • OPSEC (operations security)

    OPSEC (operations security) is a security and risk management process and strategy that classifies information, then determines ...

  • smart contract

    A smart contract is a decentralized application that executes business logic in response to events.

  • compliance risk

    Compliance risk is an organization's potential exposure to legal penalties, financial forfeiture and material loss, resulting ...

SearchSecurity
  • buffer overflow

    A buffer overflow occurs when a program or process attempts to write more data to a fixed-length block of memory, or buffer, than...

  • biometric verification

    Biometric verification is any means by which a person can be uniquely identified by evaluating one or more distinguishing ...

  • password

    A password is a string of characters used to verify the identity of a user during the authentication process.

SearchHealthIT
SearchDisasterRecovery
  • What is risk mitigation?

    Risk mitigation is a strategy to prepare for and lessen the effects of threats faced by a business.

  • change control

    Change control is a systematic approach to managing all changes made to a product or system.

  • disaster recovery (DR)

    Disaster recovery (DR) is an organization's ability to respond to and recover from an event that affects business operations.

SearchStorage
  • What is RAID 6?

    RAID 6, also known as double-parity RAID, uses two parity stripes on each disk. It allows for two disk failures within the RAID ...

  • PCIe SSD (PCIe solid-state drive)

    A PCIe SSD (PCIe solid-state drive) is a high-speed expansion card that attaches a computer to its peripherals.

  • VRAM (video RAM)

    VRAM (video RAM) refers to any type of random access memory (RAM) specifically used to store image data for a computer display.

Close