transversality condition

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To quote from Optimization in economics and finance [1]

This terminal condition on λ(T) has often been called a transversality condition, for historical reasons deriving from time-optimal problems, where the (variable) time T to reach a target is minimized. In that situation, the transversality condition appears as a description of how the optimal path crosses a terminal line (graphing state against T).


transversality condition (plural transversality conditions)

  1. (economics) A terminal condition on a costate variable in a, usually infinite, time optimization problem.


  1. ^ Bruce Desmond Craven, Sardar M. N. Islam (2005) Optimization in economics and finance, ISBN 0387242791, page 132