Papers › Optimal adaptive control with separable drift uncertainty

Optimal adaptive control with separable drift uncertainty

13 Sep 2023arXiv:2309.07091links table onlyarchive 2025-07-28

Samuel N. Cohen, Christoph Knochenhauer, Alexander Merkel

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We consider a problem of stochastic optimal control with separable drift uncertainty in strong formulation on a finite horizon. The drift coefficient of the state Yᵘ is multiplicatively influenced by an unknown random variable λ, while admissible controls u are required to be adapted to the observation filtration. Choosing a control actively influences the state and information acquisition simultaneously and comes with a learning effect. The problem, initially non-Markovian, is embedded into a higher-dimensional Markovian, full information control problem with control-dependent filtration and noise. To that problem, we apply the stochastic Perron method to characterize the value function as the unique viscosity solution to the HJB equation, explicitly construct ε-optimal controls and show that the values of strong and weak formulations agree. Numerical illustrations show a significant difference between the adaptive control and the certainty equivalence control.

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