Solution of the dynamic programming equation for a trading problem ^∗

^∗This research is partially supported by KBN grant, No. 2 P30101004

Abstract

An infinite period, discounted, one-commodity stock-exchange problem is considered. The price of the commodity is described by a stationary Markov process. At each period the decision maker is allowed to sell as well as to buy some amount of the commodity. The capacity of the store and the amount of purchase are limited and some holding cost is present. The corresponding functional equation for the infinite period, discounted leas1 cost function is considered. An analytic form of the solution is given and the optimal, stationary, infinite horizon policy is found

Keywords:

• Dynamic Programming
• Market Models
• Trading Problem
• Stationary Markov Process

^∗This research is partially supported by KBN grant, No. 2 P30101004

^∗This research is partially supported by KBN grant, No. 2 P30101004

Notes

^∗This research is partially supported by KBN grant, No. 2 P30101004