For constrained smooth or nonsmooth optimization problems, new continuously differentiable penalty functions are derived. They are proved exact in the sense that under some nondegeneracy assumption, local optimizers of a nonlinear program are precisely the optimizers of the associated penalty function. This is achieved by augmenting the dimension of the program by a variable that controls both the weight of the penalty terms and the regularization of the nonsmooth terms.
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http://www.mat.univie.ac.at/+AH4-neum/papers.html#penalty