What is Zero-One Integer Programming
Zero-one integer programming is a mathematical method of using a series of yes (1) and no (0) answers to arrive at a solution. In the world of finance, such programming is often used to provide answers to capital rationing problems, as well as to optimize investment returns and assist in planning, production, transportation and other issues.
BREAKING DOWN Zero-One Integer Programming
A simple example of how zero-one integer programming might be used in capital rationing would be in determining the number of product development projects that can be completed by a certain date or within a certain budget. For example, a number of variables for each project can be given values which ultimately result in a 1 (yes) or 0 (no) binary decision about whether or not to include the project in a budget.
Integer programming is a branch of mathematical programming or optimization, which involves creating equations to solve problems. The term "mathematical programming" is connected with the fact that the goal of solving various problems is choosing programs of action. Assigning a simple yes/no value can be a powerful way to establish a linear problem-solving framework to identify inefficiencies.