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A numerical method for solving stochastic optimal control problems with linear control
School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK.
School of Mathematics and Statistics, University of Sydney, Camperdown, Australia; Center for Dynamic Macro Economic Analysis, University of St. Andrews, St. Andrews, Fife, UK.
2011 (English)In: Computational Economics, ISSN 0927-7099, E-ISSN 1572-9974, Vol. 39, no 4, p. 429-446Article in journal (Refereed) Published
Abstract [en]

We introduce a numerical method to solve stochastic optimal control problems which are linear in the control. We facilitate the idea of solving two-point boundary value problems with spline functions in order to solve the resulting dynamic programming equation. We then show how to effectively reduce the dimension in the proposed algorithm, which improves computational time and memory constraints. An example, motivated as an invest problem with uncertain cost, is provided, and the effectiveness of our method demonstrated.

Place, publisher, year, edition, pages
Springer, 2011. Vol. 39, no 4, p. 429-446
Keywords [en]
Numerical stochastic optimal control, Dynamic programming, Computational economics, Investment decisions
National Category
Economics
Identifiers
URN: urn:nbn:se:umu:diva-238892DOI: 10.1007/s10614-011-9263-1ISI: 000301592200005Scopus ID: 2-s2.0-84858294882OAI: oai:DiVA.org:umu-238892DiVA, id: diva2:1958808
Available from: 2025-05-16 Created: 2025-05-16 Last updated: 2025-05-21Bibliographically approved

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Ewald, Christian-Oliver

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