Optimal switching problems under partial information
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diffusionEuler schemeKalman-Bucy filterMonte Carlo methodoptimal switching problempartial informationregressionstochastic filtering
Combinatorial probability (60C05) (L^p)-limit theorems (60F25) Signal detection and filtering (aspects of stochastic processes) (60G35) Stopping times; optimal stopping problems; gambling theory (60G40) Computational methods for stochastic equations (aspects of stochastic analysis) (60H35) General nonlinear regression (62J02)
Abstract: In this paper we formulate and study an optimal switching problem under partial information. In our model the agent/manager/investor attempts to maximize the expected reward by switching between different states/investments. However, he is not fully aware of his environment and only an observation process, which contains partial information about the environment/underlying, is accessible. It is based on the partial information carried by this observation process that all decisions must be made. We propose a probabilistic numerical algorithm based on dynamic programming, regression Monte Carlo methods, and stochastic filtering theory to compute the value function. In this paper, the approximation of the value function and the corresponding convergence result are obtained when the underlying and observation processes satisfy the linear Kalman-Bucy setting. A numerical example is included to show some specific features of partial information.
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Cited in
(9)- A simulation approach to optimal stopping under partial information
- A Brownian optimal switching problem under incomplete information
- On the finite horizon optimal switching problem with random lag
- A two-scale scheme for finite horizon switching problems with delays
- On the equality of solutions of max-min and min-max systems of variational inequalities with interconnected bilateral obstacles
- Stochastic switching for partially observable dynamics and optimal asset allocation
- Gain from the two-envelope problem via information asymmetry: on the suboptimality of randomized switching
- On the One-Dimensional Optimal Switching Problem
- A finite horizon optimal switching problem with memory and application to controlled SDDEs
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