STOCHASTIC CONTROL SYSTEM AND METHOD FOR MULTI-PERIOD CONSUMPTION
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Accused Products
Abstract
The present invention relates to dynamic optimization of system control over time. The need for dynamic optimization arises in many settings, as diverse as solar car power consumption during a multi-day race and retirement portfolio management. We disclose a reformulation of the control problem that overcomes the so-called “curse of dimensionality” and allows formulation of optimal control policies multiple period planning horizons. One optimal control policy is for power consumption by a solar car during a race, which involves many course segments, as course conditions vary through a day. Another is for risk in and consumption from a portfolio intended to support retirement. Both multi-period control policies take into account future uncertainty. Particular aspects of the present invention are described in the claims, specification and drawings.
47 Citations
19 Claims
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1-3. -3. (canceled)
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5. The method of 15, further including:
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summarizing the alternative diversified portfolios with efficient frontiers; and expressing the risk levels in terms of value-at-risk as a percentage of resources, given a selected probability or confidence level and a holding period.
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6. The method of 15, wherein the alternative diversified portfolios account for include at least a home, an employment income and a social security entitlement.
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7. The method of 15, further including retrieving data regarding embedded gain for tax purposes of at least one investor resources, wherein:
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the search grid further includes a range of embedded gain; and the evaluating includes realizing tax consequences of selling the resource with the embedded gain to satisfy the goals. - View Dependent Claims (8)
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- 9. The method of 15, further including outputting a control policy datacube, the control policy datacube spanning the time horizon and potential resource values of the search grid.
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11. The method of 15, further including:
prior to the evaluating the control actions, constructing a resources and claims analysis and qualifying the goals as likely to be satisfied by the resources available. - View Dependent Claims (12)
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13. (canceled)
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15. A computer-implemented method for generating a recommended a control action policy in a multi-year planning setting, the method including:
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retrieving mean return, variance and covariance data for multiple of classes of prospective investments; retrieving pay and likelihood of unemployment estimates for human capital and covariance estimates between the human capital and the prospective investments; retrieving house price return and variance data for housing resources and covariance estimates between the housing resources and the prospective investments; electronically calculating, from the retrieved data and estimates, returns on alternative diversified portfolios that include the prospective investments, the human capital and the housing resources; filtering among the alternative diversified portfolios so that the human capital and the housing resource components of the diversified portfolios conform to resources of an investor and goals set by the investor for retirement age and for holding or selling the housing resources; receiving data into computer memory and processing the data to generate a search grid spanning and subdividing at least a time horizon, potential resource values for the investor'"'"'s portfolio, a range of spending levels that satisfy essential goals of the investor and are then applied to satisfying the investor'"'"'s non-essential goals, and the range of risk taking levels; and working backwards through the time horizon, using a computer to evaluate potential control actions for particular times and resource values within the search grid, selecting recommended control actions for the particular times and resource values, the control actions setting spending and risk taking levels for the particular times, and combining the control actions into a control action policy that includes the recommended spending and risk taking levels for combinations of the particular times and resource values; wherein using the computer to evaluate the potential control actions for the particular times and resource values includes calculating a utility of potential spending and risk taking levels, such that the utility at a specific time and resource value for the potential spending and risk taking levels combines at least a utility in the specific time of the spending and a future expected utility through the end of the time horizon of future spending and risk taking levels; and such that the utility calculation recognizes a greater utility of satisfying the essential goals than of satisfying the non-essential goals; and outputting at least part of the control action policy for the time horizon and the potential resource values, including recommendations for the spending and the risk taking levels. - View Dependent Claims (4)
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16. A planning server for selecting at least immediate control actions in a multi-year planning setting, the planning server including:
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a first processor programmed to access mean return, variance and covariance data for multiple of classes of prospective investments, pay and likelihood of unemployment estimates for human capital and covariance estimates between the human capital and the prospective investments, and house price return and variance data for housing resources and covariance estimates between the housing resources and the prospective investments, and determine returns on alternative diversified portfolios that include the prospective investments, the human capital and the housing resources, and filters among the alternative diversified portfolios so that the human capital and the housing resource components of the diversified portfolios conform to resources of an investor and goals set by the investor for retirement age and for holding or selling the housing resources, store the returns on the alternative diversified portfolios a second processor programmed to generate a search grid spanning and subdividing at least a time horizon, potential resource values for the investor'"'"'s portfolio, a range of spending levels that satisfy essential goals of the investor and are then applied to satisfying the investor'"'"'s non-essential goals, and the range of risk taking levels; and a third processor programmed to access the search grid and the stored returns on the alternative diversified portfolios and works backwards through the time horizon, to evaluate potential control actions for particular times and resource values within the search grid, to select recommended control actions for the particular times and resource values, the control actions setting spending and risk taking levels for the particular times, to combine the control actions into a control action policy that includes the recommended spending and risk taking levels for combinations of the particular times and resource values, and to output the control action policy that includes the consumption and the risk levels; wherein the third processor calculates a utility of potential spending and risk taking levels, such that the utility at a specific time and resource value for the potential spending and risk taking levels combines at least a utility in the specific time of the spending that recognizes a greater utility of satisfying the essential goals than of satisfying the non-essential goals, and a future expected utility through the end of the time horizon of future spending and risk taking levels. - View Dependent Claims (14, 19)
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17-18. -18. (canceled)
Specification