Upper Bounds on Numerical Approximation Errors

Research output: Working paperResearch

Abstract

This paper suggests a method for determining rigorous upper bounds on approximation errors of numerical solutions to infinite horizon dynamic programming models. Bounds are provided for approximations of the value function and the policy function as well as the derivatives of the value function. The bounds apply to more general problems than existing bounding methods do. For instance, since strict concavity is not required, linear models and piecewise linear approximations can be dealt with. Despite the generality, the bounds perform well in comparison with existing methods even when applied to approximations of a standard(strictly concave)growth model.
Original languageEnglish
Place of PublicationFrederiksberg
PublisherInstitut for Finansiering, Copenhagen Business School
Number of pages22
ISBN (Print)8790705807
Publication statusPublished - 2004
SeriesWorking Papers / Department of Finance. Copenhagen Business School
Number2004-4
ISSN0903-0352

Keywords

  • Numerical approximation errors
  • Bellman contractions
  • Error bounds

Cite this

Raahauge, P. (2004). Upper Bounds on Numerical Approximation Errors. Frederiksberg: Institut for Finansiering, Copenhagen Business School. Working Papers / Department of Finance. Copenhagen Business School, No. 2004-4
Raahauge, Peter. / Upper Bounds on Numerical Approximation Errors. Frederiksberg : Institut for Finansiering, Copenhagen Business School, 2004. (Working Papers / Department of Finance. Copenhagen Business School; No. 2004-4).
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Raahauge, P 2004 'Upper Bounds on Numerical Approximation Errors' Institut for Finansiering, Copenhagen Business School, Frederiksberg.

Upper Bounds on Numerical Approximation Errors. / Raahauge, Peter.

Frederiksberg : Institut for Finansiering, Copenhagen Business School, 2004.

Research output: Working paperResearch

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Raahauge P. Upper Bounds on Numerical Approximation Errors. Frederiksberg: Institut for Finansiering, Copenhagen Business School. 2004.