A pathwise optimality criterion is proposed for stochastic control problems in order toreduce the risk connected with the fluctuations of the cost around its expected value. Thisapproach may be of relevance also in economic applications, where risky situations appearparticularly dangerous. Some examples of applications are examined, in particular for thelinear quadratic Gaussian model.
Almost sure optimality and optimality in probability for stochastic control problems over an infinite time horizon
DAI PRA, PAOLO;
1999-01-01
Abstract
A pathwise optimality criterion is proposed for stochastic control problems in order toreduce the risk connected with the fluctuations of the cost around its expected value. Thisapproach may be of relevance also in economic applications, where risky situations appearparticularly dangerous. Some examples of applications are examined, in particular for thelinear quadratic Gaussian model.
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