A Simultaneous Deterministic Perturbation Actor-Critic Algorithm with an Application to Optimal Mortgage Refinancing

Abstract

Wedevelopasimulation-based,two-timescale actorcritic algorithm for infinite horizon Markov decision processes with finite state and action spaces, with a discounted reward criterion. The algorithm is of the gradient ascent type and performs a search in the space of stationary randomized policies. The algorithm uses certain simultaneous deterministic perturbation stochastic approximation (SDPSA) gradient estimates for enhanced performance. We show an application of our algorithm on a problem of mortgage refinancing. Our algorithm obtains the optimal refinancing strategies in a computationally efficient manner