Linear Risk-averse Optimal Control Problems: Applications in Economics and Finance

Paolo Vitale

No 1203, Working Papers CASMEF from Dipartimento di Economia e Finanza, LUISS Guido Carli

Abstract: We discuss how Whittle's (Whittle, 1990) approach to risk-sensitive optimal control problems can be applied in economics and finance. We show how his analysis of the class of Linear Exponential Quadratic Gaussian problems can be extended to accommodate time-discounting, while preserving its simple and general recursive solutions. We apply Whittle's methodology investigating two specific problems in financial and monetary policy.

Keywords: Risk-aversion; Linear Exponential Quadratic Gaussian; Optimal Control. (search for similar items in EconPapers)
JEL-codes: C61 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (1)

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