Optimal control models in finance. A new computational approach.
This book discusses the general applications of optimal control methods to several areas in finance with a particular focus on the application of bang-bang control to financial modelling. In Chapter 1 a typical general financial optimal control model is given to explain the formula of the optimal control problems and their accompanying optimal control theories. Some classical concepts in operations research and famous standard optimal control theories are introduced and a brief description on how they are applied in financial optimal control problems is presented. The algorithms on similar optimal control problems achieved by other researchers are discussed. In Chapter 2 the authors discuss a particular case of optimal control problems and the switching time variable algorithm. The piecewise-linear transformation and the computational algorithms are presented. A simple optimal aggregate investment planning model is discussed. A part of the computer software SCOM is used to solve the differential equation. Chapter 3 presents a financial oscillator model whose state is a second-order differential equation. A transformation of time scale used to obtain the optimal switching times as well as a better gradient are presented. The transformations of the control, state, and the objective function are changed corresponding to the new time subdivision. The computational methods for these kinds of optimal control problems are constructed. The control is approximated by a step-function. Additional analysis of the control with different patterns leading to different minimums is discussed. Two sets of graphical results with different control patterns are presented. In Chapter 4 an optimal corporate financing model has been used. The analytical solution, which was created by Davis and Elzinga, is discussed. An important technique called ``penalty term is introduced for solving optimal control problems with constraints and end-term condition. The transformations of this model are described for the computation. The computational algorithms for this model are constructed and a computer software package for the algorithms is shown in Appendix. The analysis and discussion of the computing results are presented. Chapter 5 gives some experiments that have been done for examining the computational algorithms developed in Chapter 2 and Chapter 3 for computing dynamic optimization financial models. The computation tests for the algorithms in Chapter 2 are presented. Three computing examples are included. The problems met during computation are discussed and the solutions for those problems are indicated. A different control policy with one possible pattern of the financial optimal control problem is considered. The computing results of this new control policy are presented.
- Dynamic models of the firm. Determining optimal investment, financing and production policies by computer
- Financing policies via stochastic control: a dynamic programming approach
- Un modello di controllo ottimo per i margini finanziari
- Computing switching times in bang-bang control
- Optimal control of credit risk.
- State-space approaches for modelling and control in financial engineering. Systems theory and machine learning methods
- On spectral Petrov-Galerkin method for solving optimal control problem governed by a two-sided fractional diffusion equation
- Bifurcation analysis for energy transport system and its optimal control using parameter self-tuning law
- A stochastic dynamic multiobjective model for sustainable decision making
- Modeling the control effects of the banking system on the functioning of the economy. II: Selection and special features of application of optimization algorithms
- Optimal control: theory and application to science, engineering, and social sciences
- Optimal control of a dynamical system with intermediate phase constraints and applications in cash management
- Continuous-in-time financial model for public communities
- Error analysis of fully discrete finite element approximations to an optimal control problem governed by a time-fractional PDE
- Un modello di controllo ottimo per i margini finanziari
- Convergence Analysis of Leapfrog for Geodesics
- Numerical analysis of the model of optimal savings and borrowing
- Operational matrix-based solution of optimal control problems using hybrid Chelyshkov polynomials
- Optimal control of a commercial loan repayment plan
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