Control with partial observations and an explicit solution of Mortensen's equation

DOI10.1007/S00245-003-0788-0MaRDI QIDQ1885368zbMATH OpenOpenAlexFDO

Authors Václav E. Beneš, Hui Wang, Ioannis Karatzas, Daniel L. Ocone

Publication date 28 October 2004

Published in Applied Mathematics and Optimization (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/s00245-003-0788-0

zbMATH Keywords

dynamic programmingfilteringMortensen equationpartial observationsrecursive stochastic equationsstochastic controlvalue function

Mathematics Subject Classification ID

Dynamic programming in optimal control and differential games (49L20) Linear-quadratic optimal control problems (49N10) Filtering in stochastic control theory (93E11) Optimal stochastic control (93E20)

Review text

This paper considers a stochastic control problem with a general information structure, and shows that an optimal solution exists and is characterized as the unique solution of a recursive (or ``backwards) stochastic equation. For a special information structure of the ``signal-plus-noise type and with quadratic cost-functions, this recursive equation is solved for the value function of the control problem. This value function is then shown to satisfy the Mortensen equation of dynamic programming in function-space.

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