On the policy improvement algorithm in continuous time

Abstract: We develop a general approach to the Policy Improvement Algorithm (PIA) for stochastic control problems for continuous-time processes. The main results assume only that the controls lie in a compact metric space and give general sufficient conditions for the PIA to be well-defined and converge in continuous time (i.e. without time discretisation). It emerges that the natural context for the PIA in continuous time is weak stochastic control. We give examples of control problems demonstrating the need for the weak formulation as well as diffusion-based classes of problems where the PIA in continuous time is applicable.