Computational Methods for Risk-Averse Undiscounted Transient Markov Models

Özlem Çavuş () and Andrzej Ruszczynski ()
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Özlem Çavuş: Department of Industrial Engineering, Bilkent University, Ankara 06800, Turkey

Operations Research, 2014, vol. 62, issue 2, 401-417

Abstract: The total cost problem for discrete-time controlled transient Markov models is considered. The objective functional is a Markov dynamic risk measure of the total cost. Two solution methods, value and policy iteration, are proposed, and their convergence is analyzed. In the policy iteration method, we propose two algorithms for policy evaluation: the nonsmooth Newton method and convex programming, and we prove their convergence. The results are illustrated on a credit limit control problem.

Keywords: dynamic programming; risk measures; transient Markov models; value iteration; policy iteration (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:62:y:2014:i:2:p:401-417

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