Robust Control and Model Misspecification

Lars Hansen and Thomas Sargent

Chapter 6 in Uncertainty within Economic Models, 2014, pp 155-216 from World Scientific Publishing Co. Pte. Ltd.

Abstract: A decision maker fears that data are generated by a statistical perturbation of an approximating model that is either a controlled diffusion or a controlled measure over continuous functions of time. A perturbation is constrained in terms of its relative entropy. Several different two-player zero-sum games that yield robust decision rules and are related to one another, to the max-min expected utility theory of Gilboa and Schmeidler (1989), and to the recursive risk-sensitivity criterion described in discrete time by Hansen and Sargent (1995). To represent perturbed models, we use martingales on the probability space associated with the approximating model. Alternative sequential and non-sequential versions of robust control theory imply identical robust decision rules that are dynamically consistent in a useful sense.

Keywords: Uncertainty; Economic Models; Econometrics; Dynamic Programming; Macroeconomics; Robustness; Robust Control Theory; Agents; Market Prices; Model Misspecification (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9789814578127_0006 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9789814578127_0006 (text/html)
Ebook Access is available upon purchase.

Related works:
Journal Article: Robust control and model misspecification (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:wschap:9789814578127_0006

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().