Stochastic programming, Scenario tree, Complete recourse, Deterministic equivalent model, 60H35, 65C20, 68Q25,

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Cliques, Covers, Extensions, Alternates, Knapsack constraints, 0–1 programs, Tightening,

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We present an algorithmic approach for solving two-stage stochastic mixed 0-1 problems. The first stage constraints of the Deterministic Equivalent Model have 0-1 variables and continuous variables. The approach uses the Twin Node Family (TNF) concept within the so-called Branch-and-Fix Coordination algorithmic framework to satisfy the nonanticipativity constraints, jointly with a Benders Decomposition scheme to solve a given LP model at each TNF integer set. As a pilot case, the structuring of a portfolio of Mortgage-Backed Securities under uncertainty in the interest rate path on a given time horizon is used. Some computational experience is reported.

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