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Methods for Optimal Stochastic Control and Optimal Stopping Problems Featuring Time-Inconsistency

  • Author(s): Miller, Christopher Wells
  • Advisor(s): Evans, Lawrence C
  • et al.
Abstract

This thesis presents novel methods for computing optimal pre-commitment strategies in time-inconsistent optimal stochastic control and optimal stopping problems. We demonstrate how a time-inconsistent problem can often be re-written in terms of a sequential optimization problem involving the value function of a time-consistent optimal control problem in a higher-dimensional state-space. In particular, we obtain optimal pre-commitment strategies in a non-linear optimal stopping problem, in an optimal stochastic control problem involving conditional value-at-risk, and in an optimal stopping problem with a distribution constraint on the admissible stopping times. In each case, we relate the original problem to auxiliary time-consistent problems, the value functions of which may be characterized in terms of viscosity solutions of a Hamilton-Jacobi-Bellman equation.

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