Recitation Session 05 (Questions)

Recitation Session 05 (Questions) -...

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rax 08 Recitation 11.20 Bellman Equation: ݒሺ݅,݆ሻൌm a x ௗאௌሺ௜,௝ሻ ቄܿ൫ሺ݅,݆ሻ,݀൯൅ݒቀܶ൫ሺ݅,݆ሻ,݀൯ቁቅ ݒሺ݅, ݆ሻ optimal value of stage i in state j ܵሺ݅, ݆ሻ set of possible decisions in stage i , from state j ܶ൫ሺ݅, ݆ሻ,݀൯ transition state, given decision d ܿ൫ሺ݅, ݆ሻ,݀൯ cost of transition, given decision d 1.- Maximization of Utility (Deterministic DP) After some years of working in complicated FE problems, and given the large amount of wealth you have accumulated ( x 0 ), you decide to retire maximize the utility of that money for the next N years. Every year T k , you use an amount of u k of your wealth, which gives you a utility of ඥݑ and keep the rest in a nice investment fund that gives you a rate of r
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