InfSOCSol2 An updated MATLAB Package for Approximating the Solution to a Continuous-Time Infinite Horizon Stochastic Optimal Control Problem with Control and State Constraints

Azzato, Jeffrey D. and Krawczyk, Jacek B. (2009): InfSOCSol2 An updated MATLAB Package for Approximating the Solution to a Continuous-Time Infinite Horizon Stochastic Optimal Control Problem with Control and State Constraints.

Abstract

This paper is a successor of [AK08]. Both papers describe the same suite of MATLAB R° routines devised to provide an approximately optimal solution to an infinite horizon stochastic optimal control problem. The difference is that this paper explains how to allow for state and control constraints. The suite routines implement a policy improvement algorithm to optimise a Markov decision chain approximating the original control problem, as described in [Kra01c] and [Kra01b].

• Item Type: MPRA Paper
• Language: English
• Keywords: Computational economics, Financial engineering, Approximating Markov decision chains
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63 - Computational Techniques ; Simulation Modeling; C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C88 - Other Computer Software; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors

References

[AK06] Jeffrey D. Azzato and Jacek B. Krawczyk. SOCSol4L: An improved MATLAB package for approximating the solution to a continuous-time stochastic optimal control problem. Working paper, School of Economics and Finance, Victoria University of Wellington, 2006.

[AK08] Jeffrey D. Azzato and Jacek B. Krawczyk. InfSOCSol2 an updated MATLAB package for approximating the solution to a continuous-time infinite horizon stochastic optimal control problem. Munich Personal RePEc Archive., 2008. Available at http://mpra.ub.uni-muenchen.de/8374/ on 31/08/2009.

[Kra01a] Jacek B. Krawczyk. A Markovian approximated solution to a portfolio management problem. ITEM., 1(1), 2001. Available at http://www.item.woiz.polsl.pl/issue/journal1.htm on 19/04/2008.

[Kra01b] Jacek B. Krawczyk. SOCSOL-II: A MATLAB package for approximating the solution to a continuous-time infinite horizon stochastic optimal control problem. Working paper, School of Economics and Finance, Victoria University of Wellington, 2001.

[Kra01c] Jacek B. Krawczyk. Using a simple Markovian approximation for the solution to continuoustime infinite-horizon stochastic optimal control problems. Working paper, School of Economics and Finance, Victoria University of Wellington, 2001.

[Mat92] The MathWorks Inc. MATLAB. High-Performance Numeric Computation and Visualization Software, 1992.