Effective approximation methods for constrained utility maximization with drift uncertainty
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Published version
Author(s)
Zhu, Dongmei
Zheng, Harry
Type
Journal Article
Abstract
In this paper we propose a novel and effective approximation method for finding the value function for general utility maximization with closed convex control constraints and partial information. Using the separation principle and the weak duality relation, we transform the stochastic maximum principle of the fully-observable dual control problem into an equivalent
error minimization stochastic control problem and find the tight lower and upper bounds of the value function and its approximate value. Numerical examples show the goodness and usefulness of the proposed method.
error minimization stochastic control problem and find the tight lower and upper bounds of the value function and its approximate value. Numerical examples show the goodness and usefulness of the proposed method.
Date Issued
2022-07-01
Date Acceptance
2022-02-05
Citation
Journal of Optimization Theory and Applications, 2022, 194, pp.191-219
ISSN
0022-3239
Publisher
Springer
Start Page
191
End Page
219
Journal / Book Title
Journal of Optimization Theory and Applications
Volume
194
Copyright Statement
© The Author(s) 2022. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.
License URL
Sponsor
Engineering & Physical Science Research Council (EPSRC)
Grant Number
EP/V008331/1
Subjects
Science & Technology
Technology
Physical Sciences
Operations Research & Management Science
Mathematics, Applied
Mathematics
Constrained utility maximization
Drift uncertainty
Stochastic maximum principle
Effective approximation method
Lower and upper bounds of value function
PARTIAL INFORMATION
LIQUIDATION
INVESTMENT
0102 Applied Mathematics
0103 Numerical and Computational Mathematics
0906 Electrical and Electronic Engineering
Operations Research
Publication Status
Published
Date Publish Online
2022-04-08