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Data-Driven Nonparametric Robust Control under Dependence Uncertainty

Optimization and Control 2022-09-13 v1 Mathematical Finance

Abstract

We consider a multi-period stochastic control problem where the multivariate driving stochastic factor of the system has known marginal distributions but uncertain dependence structure. To solve the problem, we propose to implement the nonparametric adaptive robust control framework. We aim to find the optimal control against the worst-case copulae in a sequence of shrinking uncertainty sets which are generated from continuously observing the data. Then, we use a stochastic gradient descent ascent algorithm to numerically handle the corresponding high dimensional dynamic inf-sup optimization problem. We present the numerical results in the context of utility maximization and show that the controller benefits from knowing more information about the uncertain model.

Keywords

Cite

@article{arxiv.2209.04976,
  title  = {Data-Driven Nonparametric Robust Control under Dependence Uncertainty},
  author = {Erhan Bayraktar and Tao Chen},
  journal= {arXiv preprint arXiv:2209.04976},
  year   = {2022}
}

Comments

25 pages, 1 figure