Applied Intertemporal Optimization

Abstract

This textbook provides all tools required to easily solve intertemporal optimization problems in economics, finance, business administration and related disciplines. The focus of this textbook is on 'learning through examples' and gives a very quick access to all methods required by an undergraduate student, a PhD student and an experienced researcher who wants to explore new fields or confirm existing knowledge. Given that discrete and continuous time problems are given equal attention, insights gained in one area can be used for learning solutions methods more quickly in other contexts. This step-by-step approach is especially useful for the transition from deterministic to stochastic worlds. When it comes to stochastic methods in continuous time, the applied focus of this book is the most useful. Formulating and solving problems under continuous time uncertainty has never been explained in such a non-technical and highly accessible way.

Keywords: Intertemporal optimization, maximization, discrete time, continuous time, certainty, uncertainty, inserting, Lagrange; Hamiltonian, Dynamic Programming; Bellman equation, Ito's Lemma, Brownian motion, Poisson process, natural volatility

JEL Classification: A22, A23, C02, C61, C65, D, E, G, J6