Parameter Estimation and Sensitivity Analysis of an Optimal Control Model for Capital Asset Management

Abstract

Optimal control is a very significant field of modern control theory which has been applied in many areas like medicine, science, and finance. This work is based on realization of asset values as a benefit of asset management where a capital asset management problem is modelled and expressed mathematically from the perspective of an investor whose income is generated by return and capital gains on investments with price and return on assets assumed to satisfy uncertainty process. This results in an optimal control model based on uncertainty theory which relates two or more parameters that measures the condition or state of individual's investments. These parameters enable us to know the condition of risk involved in asset management and how to maintain and manage the assets in order to maximize expected present value of the utility of asset and minimize the risk involved to aid capital investment decision-making. Parameter sensitivity analysis is an approach given to a model so as to define significance of the factors related to the model where the whole parameter space is fully described. However, the model is applied to a real-life problem of capital asset management to deal with debt crisis of a nation's economy and the sensitivity analysis to determine the effects of the input factors on the model is investigated such that relative significance and sensitivity of each parameter on the model results are presented using parameter estimations. Finally the optimal control decision policy is obtained and discussed.

Analysis of a Stochastic Optimal Control for Pension Funds and Application to Investments in Lower Middle-Income Countries

“…we obtain the final value function by substituting equation (17) into equation 15, i.e., F into V, and by conjecture : φ Ω 1.0 × 10 5 10.1133 2.0 × 10 5 10.0332 3.0 × 10 5 9.8997 4.0 × 10 5 9.7128 Table 6: Volatility of the risky asset σ vs the portfolio volatility condition Ω σ Ω 1.0 × 10 6 9.6817 2.0 × 10 6 10.0254 3.0 × 10 6 10.0890 4.0 × 10 6 10.1114…”

“…However, some experts have carried out researches on the sensitivity analysis to ascertain the behaviour of parameters in the formulation of the model such as in control problem of management of assets, transportation problems, pension schemes and so on. [15][16][17][18] Thus, We investigate herein the application of the dynamic model for pension fund as optimization system that will ensure appropriate standard of living before and after retirement by discovering its explicit solutions using parameter sensitivity analysis and illustrating the solutions by utilizing a process which is reformed to an asset-liability model (ALM) as in [3].…”

Optimal Feasible Solutions to a Road Freight Transportation Problem

“…Latunde 2019, Latunde et al (2019), Latunde & Bamigbola (2018), Latunde et al (2016) worked on deriving and analysing the optimal values in some optimization problems of transportation, engineering and asset management by the method of sensitivity analysis of model parameters. Dantzig (1963) used the simplex method to determine the solution of transportation as the primal simplex transportation.…”

Sensitivity Analysis of Road Freight Transportation of a Mega Non-Alcoholic Beverage Industry

“…The book aims at getting the shortest, best and cheapest route to satisfying the demand from any destination. Latunde et al (2016), Latunde and Bamigbola (2018), Latunde et al (2019) and Latunde et al (2020) also analysed the model design by sensitizing some model parameters in the approach of optimal control models to asset management and transportation problems. Therefore, the objective of this paper is to present the…”