Stochastic Control

Status Draft briefPart Mathematical Models

Stochastic control chooses actions as uncertain state evolves. Market-making and execution models often arise by balancing expected reward against inventory or price risk.

Central questions

• Which process is controlled and which uncertainty remains exogenous?
• What observations are available to the controller?
• Is the derived policy robust to misspecified dynamics?

Planned model

Move from a discrete value function to a small continuous-time quoting or liquidation model while keeping every assumption connected to an earlier observable mechanism.