SHAPE - A stochastic hybrid approximation procedure for two-stage stochastic programs

We consider the problem of approximating the expected recourse function for two-stage stochastic programs. Our problem is motivated by applications th at have special structure, such as an underlying network that allows reason able approximations to the expected recourse function to be developed. In t his paper, we show how these approximations can be improved by combining th em with sample gradient information from the hue recourse function. For the case of strictly convex nonlinear approximations, we prove convergence for this hybrid approximation. The method is attractive for practical reasons because it retains the structure of the approximation.