Publication Date:
2011-06-28
Description:
We consider stochastic control problems with jump-diffusion processes and formulate an algorithm which produces, starting from a given admissible control π , a new control with a better value. If no improvement is possible, then π is optimal. Such an algorithm is well-known for discrete-time Markov Decision Problems under the name Howard’s policy improvement algorithm . The idea can be traced back to Bellman. Here we show with the help of martingale techniques that such an algorithm can also be formulated for stochastic control problems with jump-diffusion processes. As an application we derive some interesting results in financial portfolio optimization. Content Type Journal Article Pages 1-14 DOI 10.1007/s00245-011-9141-1 Authors Nicole Bäuerle, Institute for Stochastics, Karlsruhe Institute of Technology, 76128 Karlsruhe, Germany Ulrich Rieder, Department of Optimization and Operations Research, University of Ulm, 89069 Ulm, Germany Journal Applied Mathematics & Optimization Online ISSN 1432-0606 Print ISSN 0095-4616
Print ISSN:
0095-4616
Electronic ISSN:
1432-0606
Topics:
Mathematics
