Sample Question #207 (applied math – optimization)

What is the Bellman’s Equation? Write out the formulation and show how it works.

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Sample Question #207 (applied math – optimization)

What is the Bellman’s Equation? Write out the formulation and show how it works.

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ANSWER

Bellman’s Equation is the mathematical expression of a system of optimal control solutions called dynamic programming. Dynamic programming encompasses optimization problems that involve overlapping states across time, and Bellman’s equation expresses the relationship between the states. Bellman’s equation can be used to model many time series optimization problems, and it can often be solved using backwards recursion, i.e., assuming everything after t is already optimized, let’s optimize the variables at t.

For details, including what it looks like mathematically, follow the links above.