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Semiclassical Approximation in Stochastic Optimal Control: I. Portfolio Construction Problem
Social Science Research Network
This is the first in a series of papers in which we study an efficient approximation scheme for solving the Hamilton-Jacobi-Bellman equation for multi-dimensional problems in stochastic control theory. The method is a combination of a WKB style asymptotic expansion of the value function, which reduces the second order HJB partial differential equation to a hierarchy of first order PDEs, followed by a numerical algorithm to solve the first few of the resulting first order PDEs. This method isdoi:10.2139/ssrn.2457664 fatcat:dqlnk7v3u5hrbedxz2zzdvwani