Analytic Solutions for Infinite Horizon Stochastic Optimal Control Problems via Finite Horizon Approximation: A Practical Guide
13 Pages Posted: 7 Apr 2009 Last revised: 8 Nov 2009
Date Written: April 7, 2009
We show how infinite horizon stochastic optimal control problems can be solved via studying their finite horizon approximations. This often leads to analytical solutions for the infinite horizon problem, even when the complexity of the finite horizon approximation is to large, as in order to allow analytical solutions in the finite horizon case.
Keywords: Stochastic optimal control, Hamilton-Jacobi-Bellman equation
JEL Classification: C63, G11, G31, G39
Suggested Citation: Suggested Citation