Chapter

Stochastic Optimal Control

Tomas Björk

in Arbitrage Theory in Continuous Time

Published in print September 1998 | ISBN: 9780198775188
Published online November 2003 | e-ISBN: 9780191595981 | DOI: http://dx.doi.org/10.1093/0198775180.003.0014
 Stochastic Optimal Control

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This chapter gives a self‐contained introduction to optimal control of stochastic differential equations. We derive the Hamilton‐Jacobi‐Bellman equation as well as a verification theorem. The general theory is then applied to optimal consumption and investment problems.

Keywords: Hamilton‐Jacobi‐Bellman equation; optimal consumption; optimal control; optimal investment; stochastic differential equations

Chapter.  12977 words. 

Subjects: Financial Markets

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