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
  • pure risk

    Pure risk refers to risks that are beyond human control and result in a loss or no loss with no possibility of financial gain.

  • risk reporting

    Risk reporting is a method of identifying risks tied to or potentially impacting an organization's business processes.

  • chief risk officer (CRO)

    The chief risk officer (CRO) is the corporate executive tasked with assessing and mitigating significant competitive, regulatory ...

SearchSecurity
  • encryption key

    In cryptography, an encryption key is a variable value that is applied using an algorithm to a string or block of unencrypted ...

  • payload (computing)

    In computing, a payload is the carrying capacity of a packet or other transmission data unit.

  • script kiddie

    Script kiddie is a derogative term that computer hackers coined to refer to immature, but often just as dangerous, exploiters of ...

SearchHealthIT
SearchDisasterRecovery
  • What is risk mitigation?

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

  • fault-tolerant

    Fault-tolerant technology is a capability of a computer system, electronic system or network to deliver uninterrupted service, ...

  • synchronous replication

    Synchronous replication is the process of copying data over a storage area network, local area network or wide area network so ...

SearchStorage
  • cloud NAS (cloud network attached storage)

    Cloud NAS (network attached storage) is remote storage that is accessed over the internet as if it is local.

  • Terabyte (TB)

    A terabyte (TB) is a unit of digital data that is equal to about 1 trillion bytes.

  • object storage

    Object storage, also called object-based storage, is an approach to addressing and manipulating data storage as discrete units, ...

Close