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Linear Risk-averse Optimal Control Problems: Applications in Economics and Finance

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  • Paolo Vitale

    ()
    (UniversitĖ† degli studi di Chieti e Pescara and LUISS Guido Carli University of Rome)

Abstract

We 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 Info

Paper provided by Dipartimento di Economia e Finanza, LUISS Guido Carli in its series Working Papers CASMEF with number 1203.

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Date of creation: 2012
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Handle: RePEc:lui:casmef:1203

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Keywords: Risk-aversion; Linear Exponential Quadratic Gaussian; Optimal Control.;

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