Dynamic Programming Approach in Continuous Time
摘要
This chapter introduces the stochastic dynamic programming approach for diffusion processes, one of the three main methods for solving dynamic optimization problems in continuous-time asset pricing theory. This technique reformulates the optimal stochastic control problem into a partial differential equation known as the Hamilton-Jacobi-Bellman (HJB) equation. The chapter provides a step-by-step explanation of how this approach is applied.