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DOI: 10.4230/LIPIcs.FSTTCS.2013.487

Solvency Markov Decision Processes with Interest

Authors: Tomás Brázdil, Taolue Chen, Vojtech Forejt, Petr Novotný, and Aistis Simaitis

Published in: LIPIcs, Volume 24, IARCS Annual Conference on Foundations of Software Technology and Theoretical Computer Science (FSTTCS 2013)

Abstract

Solvency games, introduced by Berger et al., provide an abstract framework for modelling decisions of a risk-averse investor, whose goal is to avoid ever going broke. We study a new variant of this model, where, in addition to stochastic environment and fixed increments and decrements to the investor's wealth, we introduce interest, which is earned or paid on the current level of savings or debt, respectively. We study problems related to the minimum initial wealth sufficient to avoid bankruptcy (i.e. steady decrease of the wealth) with probability at least p. We present an exponential time algorithm which approximates this minimum initial wealth, and show that a polynomial time approximation is not possible unless P=NP. For the qualitative case, i.e. p=1, we show that the problem whether a given number is larger than or equal to the minimum initial wealth belongs to NP \cap coNP, and show that a polynomial time algorithm would yield a polynomial time algorithm for mean-payoff games, existence of which is a longstanding open problem. We also identify some classes of solvency MDPs for which this problem is in P. In all above cases the algorithms also give corresponding bankruptcy avoiding strategies.

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Tomás Brázdil, Taolue Chen, Vojtech Forejt, Petr Novotný, and Aistis Simaitis. Solvency Markov Decision Processes with Interest. In IARCS Annual Conference on Foundations of Software Technology and Theoretical Computer Science (FSTTCS 2013). Leibniz International Proceedings in Informatics (LIPIcs), Volume 24, pp. 487-499, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2013)

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@InProceedings{brazdil_et_al:LIPIcs.FSTTCS.2013.487,
  author =	{Br\'{a}zdil, Tom\'{a}s and Chen, Taolue and Forejt, Vojtech and Novotn\'{y}, Petr and Simaitis, Aistis},
  title =	{{Solvency Markov Decision Processes with Interest}},
  booktitle =	{IARCS Annual Conference on Foundations of Software Technology and Theoretical Computer Science (FSTTCS 2013)},
  pages =	{487--499},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-939897-64-4},
  ISSN =	{1868-8969},
  year =	{2013},
  volume =	{24},
  editor =	{Seth, Anil and Vishnoi, Nisheeth K.},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.FSTTCS.2013.487},
  URN =		{urn:nbn:de:0030-drops-43959},
  doi =		{10.4230/LIPIcs.FSTTCS.2013.487},
  annote =	{Keywords: Markov decision processes, algorithms, complexity, market models.}
}

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Solvency Markov Decision Processes with Interest

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