Stochastic Optimal Control
The purpose of this article is, first, to state the stochastic optimal control problem and, second, to explain how it differs from deterministic optimal control and why that difference is crucial in economic problems. The article presents intuitively the methodology of optimal stochastic control and provides an illustration from optimal stochastic economic growth as an application of this mathematical technique in economics.
KeywordsApplied control Bellman, R. Continuous time models Deterministic optimal control Discrete time models Dynamic economic models Dynamic programming Hamilton–Jacobi–Bellman equation Principle of optimality Pure randomness Stochastic optimal control Taylor’s th Uncertainty White noise Wiener process
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