Recently, Hata et al. (SIAM J. Cont. Optim. 56, 3149–3183, 2018) employed a general nonlinear factor model and solved for a consumption and investment problem on a finite time horizon to optimize a discounted expected power utility of consumption and terminal wealth. Further, Hata and Yasuda (Policy improvement algorithm for an optimal consumption and investment problem under general stochastic factor models (2024, preprint)) proposed a policy improvement algorithm, which establishes an iteration procedure converging to the value function and the optimal strategies obtained in Hata et al. (SIAM J. Cont. Optim. 56, 3149–3183, 2018). Here, we employ a certain nonlinear stochastic factor model and provide some numerical results to understand convergence behaviors of the algorithm.

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Policy Improvement Algorithm for an Optimal Consumption and Investment Problem Under a Certain Nonlinear Stochastic Factor Model

  • Hiroaki Hata,
  • Kazuhiro Yasuda

摘要

Recently, Hata et al. (SIAM J. Cont. Optim. 56, 3149–3183, 2018) employed a general nonlinear factor model and solved for a consumption and investment problem on a finite time horizon to optimize a discounted expected power utility of consumption and terminal wealth. Further, Hata and Yasuda (Policy improvement algorithm for an optimal consumption and investment problem under general stochastic factor models (2024, preprint)) proposed a policy improvement algorithm, which establishes an iteration procedure converging to the value function and the optimal strategies obtained in Hata et al. (SIAM J. Cont. Optim. 56, 3149–3183, 2018). Here, we employ a certain nonlinear stochastic factor model and provide some numerical results to understand convergence behaviors of the algorithm.