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Discrete-Time Approximation of Risk-Averse Control Problems for Diffusion Processes

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arxiv 1508.05316 v2 pith:D634OOKH submitted 2015-08-21 math.OC

classification math.OC
keywords controloptimalproblemsdefineddiffusionfunctionspiecewise-constantproblem
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abstract

We consider optimal control problems for diffusion processes, where the objective functional is defined by a time-consistent dynamic risk measure. We focus on coherent risk measures defined by $g$-evaluations. For such problems, we construct a family of time and space perturbed systems with piecewise-constant control functions. We obtain a regularized optimal value function by a special mollification procedure. This allows us to establish a bound on the difference between the optimal value functions of the original problem and of the problem with piecewise-constant controls.

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