Joint work with Peter Forsyth
An advantageous feature of piecewise constant policy timestepping for
Hamilton-Jacobi-Bellman (HJB) equations is that different linear approximation
schemes, and indeed different meshes, can be used for the resulting linear
equations for different control parameters. Standard convergence analysis
suggests that monotone (i.e., linear) interpolation must be used to transfer
data between meshes. Using the equivalence to a switching system and an
adaptation of the usual arguments based on consistency, stability and
monotonicity, we show that if limited, potentially higher order interpolation
is used for the mesh transfer, convergence is guaranteed. We provide numerical
tests for the mean-variance optimal investment problem and the uncertain
volatility option pricing model, and compare the results to published test
cases.