A level-set approach to the control of state-constrained McKean-Vlasov equations: application to renewable energy storage and portfolio selection

Maximilien Germain, Huy\^en Pham and Xavier Warin
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Maximilien Germain: EDF R\&D OSIRIS, EDF R\&D, EDF, LPSM
Huy\^en Pham: LPSM
Xavier Warin: EDF R\&D OSIRIS, EDF R\&D, EDF, FiME Lab

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Abstract: We consider the control of McKean-Vlasov dynamics (or mean-field control) with probabilistic state constraints. We rely on a level-set approach which provides a representation of the constrained problem in terms of an unconstrained one with exact penalization and running maximum or integral cost. The method is then extended to the common noise setting. Our work extends (Bokanowski, Picarelli, and Zidani, SIAM J. Control Optim. 54.5 (2016), pp. 2568--2593) and (Bokanowski, Picarelli, and Zidani, Appl. Math. Optim. 71 (2015), pp. 125--163) to a mean-field setting. The reformulation as an unconstrained problem is particularly suitable for the numerical resolution of the problem, that is achieved from an extension of a machine learning algorithm from (Carmona, Lauri{\`e}re, arXiv:1908.01613 to appear in Ann. Appl. Prob., 2019). A first application concerns the storage of renewable electricity in the presence of mean-field price impact and another one focuses on a mean-variance portfolio selection problem with probabilistic constraints on the wealth. We also illustrate our approach for a direct numerical resolution of the primal Markowitz continuous-time problem without relying on duality.

Date: 2021-12, Revised 2022-11
New Economics Papers: this item is included in nep-big and nep-ene
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