Certainty equivalence principle in stochastic differential games: An inverse problem approach

Producción CientíficaThis paper aims to characterize a class of stochastic differential games, which satisfy the certainty equivalence principle beyond the cases with quadratic, linear, or logarithmic value functions. We focus on scalar games with linear dynamics in the players' strategies and with separable payoff functionals. Our results are based on the resolution of an inverse problem that determines strictly concave utility functions of the players so that the game satisfies the certainty equivalence principle. Besides establishing necessary and sufficient conditions, the results obtained in this paper are also a tool for discovering new closed-form solutions, as we show in two specific applications: in a generalization of a dynamic advertising model and in a game of noncooperative exploitation of a productive asset.Este trabajo se ha hecho con ayuda de los proyectos del Ministerio de Economía, Industria y Competitividad, Grant/Award Number: ECO2017-86261-P, ECO2014-56384-P, y MDM 2014-0431, de la Consejería de Educación, Juventud y Deporte de la Comunidad de Madrid, Grant/Award Number: MadEco-CM S2015/HUM-3444, y de la Consejería de Educación de la Junta de Castilla y León VA148G18

Adaptive LQ control: Conflict between identification and control

We consider one of the fundamental limitations of indirect adaptive control based on the minimization of a quadratic cost criterion and the certainty equivalence principle. We show that the interaction between (closed-loop) identification and optimal control is conflictive in the sense that almost all possible limits of the sequence of parameter estimates induce suboptimal behavior of the adaptively controlled system

Singular nonlinear H∞ optimal control problem

The theory of nonlinear H∞ of optimal control for affine nonlinear systems is extended to the more general context of singular H∞ optimal control of nonlinear systems using ideas from the linear H∞ theory. Our approach yields under certain assumptions a necessary and sufficient condition for solvability of the state feedback singular H∞ control problem. The resulting state feedback is then used to construct a dynamic compensator solving the nonlinear output feedback H∞ control problem by applying the certainty equivalence principle

Incremental generalized homogeneity, observer design and semiglobal stabilization

The notion of incremental generalized homogeneity is introduced, giving new results on semiglobal stabilization by output feedback and observer design and putting into a unifying framework the stabilization design for triangular (feedback/ feedforward) and homogeneous systems. A state feedback controller and an asymptotic state observer are designed separately by dominating the generalized homogeneity degree of the nonlinearities with the degree of the linear approximation of the system and an output feedback controller is obtained according to a certainty-equivalence principle

Indirect adaptive higher-order sliding-mode control using the certainty-equivalence principle

Seit den 50er Jahren werden große Anstrengungen unternommen, Algorithmen zu entwickeln, welche in der Lage sind Unsicherheiten und Störungen in Regelkreisen zu kompensieren. Früh wurden hierzu adaptive Verfahren, die eine kontinuierliche Anpassung der Reglerparameter vornehmen, genutzt, um die Stabilisierung zu ermöglichen. Die fortlaufende Modifikation der Parameter sorgt dabei dafür, dass strukturelle Änderungen im Systemmodell sich nicht auf die Regelgüte auswirken. Eine deutlich andere Herangehensweise wird durch strukturvariable Systeme, insbesondere die sogenannte Sliding-Mode Regelung, verfolgt. Hierbei wird ein sehr schnell schaltendes Stellsignal für die Kompensation auftretender Störungen und Modellunsicherheiten so genutzt, dass bereits ohne besonderes Vorwissen über die Störeinflüsse eine beachtliche Regelgüte erreicht werden kann. Die vorliegende Arbeit befasst sich mit dem Thema, diese beiden sehr unterschiedlichen Strategien miteinander zu verbinden und dabei die Vorteile der ursprünglichen Umsetzung zu erhalten. So benötigen Sliding-Mode Verfahren generell nur wenige Informationen über die Störung, zeigen jedoch Defizite bei Unsicherheiten, die vom Systemzustand abhängen. Auf der anderen Seite können adaptive Regelungen sehr gut parametrische Unsicherheiten kompensieren, wohingegen unmodellierte Störungen zu einer verschlechterten Regelgüte führen. Ziel dieser Arbeit ist es daher, eine kombinierte Entwurfsmethodik zu entwickeln, welche die verfügbaren Informationen über die Störeinflüsse bestmöglich ausnutzt. Hierbei wird insbesondere Wert auf einen theoretisch fundierten Stabilitätsnachweis gelegt, welcher erst durch Erkenntnisse der letzten Jahre im Bereich der Lyapunov-Theorie im Zusammenhang mit Sliding-Mode ermöglicht wurde. Anhand der gestellten Anforderungen werden Regelalgorithmen entworfen, die eine Kombination von Sliding-Mode Reglern höherer Ordnung und adaptiven Verfahren darstellen. Neben den theoretischen Betrachtungen werden die Vorteile des Verfahrens auch anhand von Simulationsbeispielen und eines Laborversuchs nachgewiesen. Es zeigt sich hierbei, dass die vorgeschlagenen Algorithmen eine Verbesserung hinsichtlich der Regelgüte als auch der Robustheit gegenüber den konventionellen Verfahren erzielen.Since the late 50s, huge efforts have been made to improve the control algorithms that are capable of compensating for uncertainties and disturbances. Adaptive controllers that adjust their parameters continuously have been used from the beginning to solve this task. This adaptation of the controller allows to maintain a constant performance even under changing conditions. A different idea is proposed by variable structure systems, in particular by the so-called sliding-mode control. The idea is to employ a very fast switching signal to compensate for disturbances or uncertainties. This thesis deals with a combination of these two rather different approaches while preserving the advantages of each method. The design of a sliding-mode controller normally does not demand sophisticated knowledge about the disturbance, while the controller's robustness against state-dependent uncertainties might be poor. On the other hand, adaptive controllers are well suited to compensate for parametric uncertainties while unstructured influence may result in a degraded performance. Hence, the objective of this work is to design sliding-mode controllers that use as much information about the uncertainty as possible and exploit this knowledge in the design. An important point is that the design procedure is based on a rigorous proof of the stability of the combined approach. Only recent results on Lyapunov theory in the field of sliding-mode made this analysis possible. It is shown that the Lyapunov function of the nominal sliding-mode controller has a direct impact on the adaptation law. Therefore, this Lyapunov function has to meet certain conditions in order to allow a proper implementation of the proposed algorithms. The main contributions of this thesis are sliding-mode controllers, extended by an adaptive part using the certainty-equivalence principle. It is shown that the combination of both approaches results in a novel controller design that is able to solve a control task even in the presence of different classes of uncertainties. In addition to the theoretical analysis, the advantages of the proposed method are demonstrated in a selection of simulation examples and on a laboratory test-bench. The experiments show that the proposed control algorithm delivers better performance in regard to chattering and robustness compared to classical sliding-mode controllers

Min-max certainty equivalence principle and differential games

This paper presents a version of the certainty equivalence principle, usable for nonlinear, variable end-time, partial observation zero-sum differential games, which states that under the unicity of the solution to the auxiliary problem, optimal controllers can be derived from the solution of the related perfect observation game. An example is provided where in one region, the new extended result holds, giving an optimal control and in another region, the unicity condition is not met, leading indeed to a non-certainty equivalent optimal controller

Non-standard central bank loss functions, skewed risks, and the certainty equivalence principle

This paper sets out to investigate the role of additive uncertainty under plausible non-standard central bank loss functions over future inflation. Building on a substantial body of evidence in the economic psychology literature, this paper postulates (i) period-by-period loss functions that are non-convex, i.e. displaying diminishing or non-increasing sensitivity to losses, and (ii) non-linear weighing of probabilities, hence departing from the expected utility paradigm. In addition, a simple and plausible form of non-time separability of the central bank's inter-temporal loss function is also considered in the analysis. The main conclusion of the study is that if the additive uncertainty is caused by a non-Normal distributed additive shock, for instance if the probability distribution of the shock is skewed, then with these departures from the quadratic function the principle of certainty equivalence does not hold. Thus, it appears that with additive uncertainty of the non-Normal type the assumption of a quadratic loss function for the central banker may not be as innocuous as it is commonly regarded. Conversely, non-time separability of the central bank inter-temporal loss function as studied in this paper does not determine i style="mso-bidi-font-style: normal">per se any departure from certainty equivalence. Moreover, no evidence is found of an optimal policy gradualism as a response to increased additive uncertainty even under the non-standard loss functions considered in this paper.

Pricing forward contracts in power markets by the certainty equivalence principle: Explaining the sign of the market risk premium.

In this paper we provide a framework that explains how the market risk premium, defined as the difference between forward prices and spot forecasts, depends on the risk preferences of market players and the interaction between buyers and sellers. In commodities markets this premium is an important indicator of the behavior of buyers and sellers and their views on the market spanning between short-term and long-term horizons. We show that under certain assumptions it is possible to derive explicit solutions that link levels of risk aversion and market power with market prices of risk and the market risk premium. We apply our model to the German electricity market and show that the market risk premium exhibits a term structure which can be explained by the combination of two factors. Firstly, the levels of risk aversion of buyers and sellers, and secondly, how the market power of producers, relative to that of buyers, affects forward prices with different delivery periodsContango; Backwardation; Market price of risk; Electricity forwards; Market risk premium; Forward risk premium; Forward bias; Market power;

Pricing forward contracts in power markets by the certainty equivalence principle : explaining the sign of the market risk premium.

In this paper we provide a framework that explains how the market risk premium, defined as the difference between forward prices and spot forecasts, depends on the risk preferences of market players and the interaction between buyers and sellers. In commodities markets this premium is an important indicator of the behavior of buyers and sellers and their views on the market spanning between short-term and long-term horizons. We show that under certain assumptions it is possible to derive explicit solutions that link levels of risk aversion and market power with market prices of risk and the market risk premium. We apply our model to the German electricity market and show that the market risk premium exhibits a term structure which can be explained by the combination of two factors. Firstly, the levels of risk aversion of buyers and sellers, and secondly, how the market power of producers, relative to that of buyers, affects forward prices with different delivery periodsContango; Backwardation; Market price of risk; Electricity forwards; Market risk premium; Forward risk premium; Forward bias; Market power;