Using ddp solve for optimization over two variables
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I have a dynamic programming model, in which the Value of firm today depends on the productivity shock today, capital today, capital tomorrow and debt level. I have to maximize the firm value and therefore find the optimal levels of capital and debt that maximize this value. The shock follows a log normal process. Is it possible to use ddpsolve to solve this problem? I am confused because I have to optimize over two variables and I haven't found any example does does so.
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Torsten
on 1 Jul 2022
This sounds like a stochastic optimization problem. I don't know about ddpsolve, but are you sure that the code is able to solve such problems ?
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