Matrix difference equation

A matrix difference equation[1][2] is a difference equation in which the value of a vector (or sometimes, a matrix) of variables at one point in time is related to its own value at one or more previous points in time, using matrices. Occasionally, the time-varying entity may itself be a matrix instead of a vector. The order of the equation is the maximum time gap between any two indicated values of the variable vector. For example,

is an example of a second-order matrix difference equation, in which x is an n × 1 vector of variables and A and B are n×n matrices. This equation is homogeneous because there is no vector constant term added to the end of the equation. The same equation might also be written as

or as

.

The most commonly encountered matrix difference equations are first-order.

Non-homogeneous first-order matrix difference equations and the steady state

An example of a non-homogeneous first-order matrix difference equation is

with additive constant vector b. The steady state of this system is a value x* of the vector x which, if reached, would not be deviated from subsequently. x* is found by setting in the difference equation and solving for x* to obtain

where is the n×n identity matrix, and where it is assumed that is invertible. Then the non-homogeneous equation can be rewritten in homogeneous form in terms of deviations from the steady state:

Stability of the first-order case

The first-order matrix difference equation [xt - x*] = A[xt-1-x*] is stable—that is, converges asymptotically to the steady state x*—if and only if all eigenvalues of the transition matrix A (whether real or complex) have an absolute value which is less than 1.

Solution of the first-order case

Assume that the equation has been put in the homogeneous form . Then we can iterate and substitute repeatedly from the initial condition , which is the initial value of the vector y and which must be known in order to find the solution:

and so forth.

Assume A is diagonalizable. By induction, we obtain the solution in terms of t:

where P is an n × n matrix whose columns are the eigenvectors of A (assuming the eigenvalues are all distinct) and D is an n × n diagonal matrix whose diagonal elements are the eigenvalues of A. This solution motivates the above stability result: shrinks to the zero matrix over time if and only if the eigenvalues of A are all less than unity in absolute value.

Extracting the dynamics of a single scalar variable from a first-order matrix system

Starting from the n-dimensional system we can extract the dynamics of one of the state variables, say The above solution equation for shows that the solution for is in terms of the n eigenvalues of A. Therefore the equation describing the evolution of by itself must have a solution involving those same eigenvalues. This description intuitively motivates the equation of evolution of which is

where the parameters are from the characteristic equation of the matrix A:

Thus each individual scalar variable of an n-dimensional first-order linear system evolves according to a univariate nth degree difference equation, which has the same stability property (stable or unstable) as does the matrix difference equation.

Solution and stability of higher-order cases

Matrix difference equations of higher order—that is, with a time lag longer than one period—can be solved, and their stability analyzed, by converting them into first-order form using a block matrix. For example, suppose we have the second-order equation

with the variable vector x being n×1 and A and B being n×n. This can be stacked in the form

where is the n×n identity matrix and 0 is the n×n zero matrix. Then denoting the 2n×1 stacked vector of current and once-lagged variables as and the 2n×2n block matrix as L, we have as before the solution

Also as before, this stacked equation and thus the original second-order equation are stable if and only if all eigenvalues of the matrix L are smaller than unity in absolute value.

Nonlinear matrix difference equations: Riccati equations

In linear-quadratic-Gaussian control, there arises a nonlinear matrix equation for the reverse evolution of a current-and-future-cost matrix, denoted below as H. This equation is called a discrete dynamic Riccati equation, and it arises when a variable vector evolving according to a linear matrix difference equation is controlled by manipulating an exogenous vector in order to optimize a quadratic cost function. This Riccati equation assumes the following, or a similar, form:

where H, K, and A are n×n, C is n×k, R is k×k, n is the number of elements in the vector to be controlled, and k is the number of elements in the control vector. The parameter matrices A and C are from the linear equation, and the parameter matrices K and R are from the quadratic cost function. See here for details.

In general this equation cannot be solved analytically for in terms of t ; rather, the sequence of values for is found by iterating the Riccati equation. However, it was shown in [3] that this Riccati equation can be solved analytically if R is the zero matrix and n=k+1, by reducing it to a scalar rational difference equation; moreover, for any k and n if the transition matrix A is nonsingular then the Riccati equation can be solved analytically in terms of the eigenvalues of a matrix, although these may need to be found numerically.[4]

In most contexts the evolution of H backwards through time is stable, meaning that H converges to a particular fixed matrix H* which may be irrational even if all the other matrices are rational. See also Stochastic control#Discrete time.

A related Riccati equation[5] is

in which the matrices X, A, B, C, and E are all n×n. This equation can be solved explicitly. Suppose , which certainly holds for t=0 with N0 = X0 and with D0 equal to the identity matrix. Then using this in the difference equation yields

so by induction the form holds for all t. Then the evolution of N and D can be written as

Thus

See also

References

  1. ↑ Cull, Paul; Flahive, Mary; and Robson, Robbie. Difference Equations: From Rabbits to Chaos, Springer, 2005, chapter 7; ISBN 0-387-23234-6.
  2. ↑ Chiang, Alpha C., Fundamental Methods of Mathematical Economics, third edition, McGraw-Hill, 1984: 608–612.
  3. ↑ Balvers, Ronald J., and Mitchell, Douglas W., "Reducing the dimensionality of linear quadratic control problems," Journal of Economic Dynamics and Control 31, 2007, 141–159.
  4. ↑ Vaughan, D. R., "A nonrecursive algebraic solution for the discrete Riccati equation," IEEE Transactions on Automatic Control 15, 1970, 597-599.
  5. ↑ Martin, C. F., and Ammar, G., "The geometry of the matrix Riccati equation and associated eigenvalue method," in Bittani, Laub, and Willems (eds.), The Riccati Equation, Springer-Verlag, 1991.
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