Linear Risk-averse Optimal Control Problems: Applications in Economics and Finance
AbstractWe discuss how Whittle's (Whittle, 1990) approach to risk-sensitive optimal control problems can be applied in economics and finance. We show how his analysis of the class of Linear Exponential Quadratic Gaussian problems can be extended to accommodate time-discounting, while preserving its simple and general recursive solutions. We apply Whittle's methodology investigating two specific problems in financial and monetary policy.
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Bibliographic InfoPaper provided by Dipartimento di Economia e Finanza, LUISS Guido Carli in its series Working Papers CASMEF with number 1203.
Date of creation: 2012
Date of revision:
Risk-aversion; Linear Exponential Quadratic Gaussian; Optimal Control.;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
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