Applicable stochastic control: From theory to practice
type: Item
instance of: scholarly article
title: Applicable stochastic control: From theory to practice
zbMATH Open document ID: 0808.90088
DOI: 10.1016/0377-2217(94)90260-7
author: Charles S. Tapiero
published in: European Journal of Operational Research
publication date: 1994-07-21T00:00:00Z
review text: Stochastic control is defined as a unifying framework for treating multi- stage or multi-period optimization problems subject to stochastic disturbances. Few problems can be solved analytically however. For this reason there is an increased awareness that a broad range of techniques including stochastic approximations, perturbations techniques, Markov decision processes, simulation, etc. are an essential part of stochastic control kits. This paper provides both an outline of the techniques and the applications of stochastic control to management and business problems. A framework is first constructed providing an outline of the type of decision problems handled by stochastic control. A number of problems are then formulated and solved analytically. Subsequently, a review of numerical techniques and non-trivial problems are considered. Particularly, a multi-armed bandit problem and an option trading problem is formulated and stochastic control techniques applied. For the latter problem, it is shown that the decision to sell an option is a simple stopping time problem.
Mathematics Subject Classification ID: 90B99
Mathematics Subject Classification ID: 93E20
Mathematics Subject Classification ID: 91B26
Mathematics Subject Classification ID: 93C95
Mathematics Subject Classification ID: 60G40
Mathematics Subject Classification ID: 90C40
zbMATH DE Number: 609640
zbMATH Keywords: multi-period optimization
zbMATH Keywords: stochastic disturbances
zbMATH Keywords: multi-armed bandit
zbMATH Keywords: option trading
MaRDI profile type: Publication
full work available at URL: 0377-2217(94)90260-7
OpenAlex ID: W2011031901
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description: scientific article; zbMATH DE number 609640