Optimization is the formal process by which decisions are made under conditions of uncertainty.
Optimization is the formal process by which decisions are made under conditions of uncertainty.
Components of an optimization risk modeling exercise include a statement of the range of decision options, a representation of the uncertain conditions (usually in the form of probability distributions), a statement of constraints (usually in the form of limitations on the range of decision options), and a statement of the objective to be maximized (or minimized). An example of an optimization exercise is an asset allocation study.