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Stochastic control of geometric processes

Published online by Cambridge University Press:  14 July 2016

Knut K. Aase
Knut K. Aase*
Affiliation:
Norwegian School of Economics and Business Administration
*
∗Postal address: Norwegian School of Economics and Business Administration, 5035 Bergen, Norway.
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Abstract

Stochastic optimization of semimartingales which permit a dynamic description, like a stochastic differential equation, leads normally to dynamic programming procedures. The resulting Bellman equation is often of a very genera! nature, and analytically hard to solve. The models in the present paper are formulated in terms of the relative change, and the optimality criterion is to maximize the expected rate of growth. We show how this can be done in a simple way, where we avoid using the Bellman equation. An application is indicated.

Keywords

SEMIMARTINGALESSTOCHASTIC DIFFERENTIAL EQUATIONSDOLÉANS-DADE'S FORMULAGROWTH MODELSPORTFOLIO OPTIMIZATION

Information

Type
Research Papers
Information
Journal of Applied Probability , Volume 24 , Issue 1 , March 1987 , pp. 97 - 104
Copyright
Copyright © Applied Probability Trust 1987 

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