Analytic solutions for infinite horizon stochastic optimal control problems via finite horizon approximation: A practical guide |
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| Authors: | Christian-Oliver Ewald Wen-Kai Wang |
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| Affiliation: | a School of Mathematics and Statistics, University of Sydney, Australiab Center for Dynamic Macroeconomic Analysis, University of St. Andrews, United Kingdomc School of Mathematics and Statistics, University of Sydney, Australia |
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| Abstract: | We show how infinite horizon stochastic optimal control problems can be solved via studying their finite horizon approximations. This often leads to analytical solutions for the infinite horizon problem by studying phase diagrams, even in cases where the complexity of the finite horizon case does not permit analytic solutions. Our approach can be applied to many problems in dynamic economics. |
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| Keywords: | C61 C63 C73 |
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