In recent years, the interest of investors has shifted to computerized asset allocation (portfolio management) to exploit the growing dynamics of the capital markets. In this paper, asset allocation is formalized as a Markovian Decision Problem which can be optimized by applying dynamic programming or reinforcement learning based algorithms. Using an artificial exchange rate, the asset allocation strategy optimized with reinforcement learning (Q-Learning) is shown to be equivalent to a policy computed by dynamic programming. The approach is then tested on the task to invest liquid capital in the German stock market. Here, neural networks are used as value function approximators. The resulting asset allocation strategy is superior to a heuristic benchmark policy. This is a further example which demonstrates the applicability of neural network based reinforcement learning to a problem setting with a high dimensional state space.

Recently, however, there have been some successful applications of neural networks in a totally different context - that of sequential decision making under uncertainty (stochastic control). Stochastic control problems have been studied extensively in the operations research and control theory literature for a long time, using the methodology of dynamic programming [Bertsekas, 1995]. In dynamic programming, the most important object is the cost-to-go (or value) junction, which evaluates the expected future 1046 B. V. ROY, 1. N. TSITSIKLIS

We describe the reinforcement learning problem, motivate algorithms which seek an approximation to the Q function, and present new convergence results for two such algorithms. 1 INTRODUCTION AND BACKGROUND Imagine an agent acting in some environment. At time t, the environment is in some state Xt chosen from a finite set of states. The agent perceives Xt, and is allowed to choose an action at from some finite set of actions. Meanwhile, the agent experiences a real-valued cost Ct, chosen from a distribution which also depends only on Xt and at and which has finite mean and variance. Such an environment is called a Markov decision process, or MDP.

Performing policy iteration in dynamic programming should only require knowledge of relative rather than absolute measures of the utility of actions (Werbos, 1991) - what Baird (1993) calls the ad vantages of actions at states. Nevertheless, most existing methods in dynamic programming (including Baird's) compute some form of absolute utility function. For smooth problems, advantages satisfy two differential consistency conditions (including the requirement that they be free of curl), and we show that enforcing these can lead to appropriate policy improvement solely in terms of advantages.

Elucidation of the relationship between TD learning and dynamic programming (DP) has provided good theoretical insights (Barto et al., 1995). However, conventional TD algorithms were based on discrete-time, discrete-state formulations. In applying these algorithms to control problems, time, space and action had to be appropriately discretized using a priori knowledge or by trial and error. Furthermore, when a TD algorithm is used for neurobiological modeling, discrete-time operation is often very unnatural. There have been several attempts to extend TD-like algorithms to continuous cases. Bradtke et al. (1994) showed convergence results for DPbased algorithms for a discrete-time, continuous-state linear system with a quadratic cost. Bradtke and Duff (1995) derived TD-like algorithms for continuous-time, discrete-state systems (semi-Markov decision problems). Baird (1993) proposed the "advantage updating" algorithm by modifying Q-Iearning so that it works with arbitrary small time steps.

The controllers usually have no or only very little prior knowledge of the environment. While only local communication between controllers is allowed, the controllers must cooperate among themselves to achieve the common, global objective. Finding the optimal routing policy in such a distributed manner is very difficult. Moreover, since the environment is non-stationary, the optimal policy varies with time as a result of changes in network traffic and topology.

Ralph Neuneier* Siemens AG, Corporate Research and Development Otto-Hahn-Ring 6, D-81730 Munchen, Germany Abstract In recent years, the interest of investors has shifted to computerized assetallocation (portfolio management) to exploit the growing dynamics of the capital markets. In this paper, asset allocation is formalized as a Markovian Decision Problem which can be optimized byapplying dynamic programming or reinforcement learning based algorithms. Using an artificial exchange rate, the asset allocation strategyoptimized with reinforcement learning (Q-Learning) is shown to be equivalent to a policy computed by dynamic programming. Theapproach is then tested on the task to invest liquid capital in the German stock market. Here, neural networks are used as value function approximators.

We have developed a foveated gesture recognition system that runs in an unconstrained office environment with an active camera. Using visionroutines previously implemented for an interactive environment, wedetermine the spatial location of salient body parts of a user and guide an active camera to obtain images of gestures or expressions. A hidden-state reinforcement learning paradigm is used to implement visual attention. The attention module selects targets to foveate based on the goal of successful recognition, and uses a new multiple-model Q-Iearning formulation. Given a set of target and distractor gestures, our system can learn where to foveate to maximally discriminate a particular gesture. 1 INTRODUCTION Vision has numerous uses in the natural world.

Performing policy iteration in dynamic programming should only require knowledge of relative rather than absolute measures of the utility of actions (Werbos, 1991) - what Baird (1993) calls the advantages ofactions at states. Nevertheless, most existing methods in dynamic programming (including Baird's) compute some form of absolute utility function. For smooth problems, advantages satisfy two differential consistency conditions (including the requirement that they be free of curl), and we show that enforcing these can lead to appropriate policy improvement solely in terms of advantages. 1 Introd uction In deciding how to change a policy at a state, an agent only needs to know the differences (called advantages) between the total return based on taking each action a for one step and then following the policy forever after, and the total return based on always following the policy (the conventional value of the state under the policy). The advantages are like differentials - they do not depend on the local levels of the total return. Indeed, Werbos (1991) defined Dual Heuristic Programming (DHP), using these facts, learning the derivatives of these total returns with respect to the state.

Recently, however, there have been some successful applications of neural networks in a totally different context - that of sequential decision making under uncertainty (stochastic control). Stochastic control problems have been studied extensively in the operations research and control theory literature for a long time, using the methodology of dynamic programming [Bertsekas, 1995]. In dynamic programming, the most important object is the cost-to-go (or value) junction, which evaluates the expected future 1046 B.V. ROY, 1. N. TSITSIKLIS