When I change the database configuration and db manager config in db2 where are they stored? are they stored in some files. Suppose I shift the database to anothar machine or I restore the database from a backup, do I have to tune all the db and dbm config parameters all over again
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You'll have to reconfigure the instance/database .. You cannot copy the config files from one db/instance to another ...

When you build a new db/instance, remember to copy the db2 registry variables (db2set -all) also across ...

The values that we change must be physically stored somewher onthe db server.Where is the physical location of this configuration file ?

The configuration parameters and registry variables that affect the DB2 query optimizer can be extracted with db2llook -f option.