Optimal entry to an irreversible investment plan with non convex costs

DOI10.1007/S11579-017-0187-YMaRDI QIDQ1687372zbMATH OpenOpenAlexWikidataFDO

Authors Tiziano De Angelis, Giorgio Ferrari, Randall Martyr, John Moriarty

Publication date 29 December 2017

Published in Mathematics and Financial Economics (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://arxiv.org/abs/1602.03106

zbMATH Keywords

continuous-time inventoryirreversible investmentoptimal stoppingOrnstein-Uhlenbeck price processsingular stochastic control

Mathematics Subject Classification ID

Stopping times; optimal stopping problems; gambling theory (60G40) Diffusion processes (60J60) Portfolio theory (91G10) Optimal stochastic control (93E20)

Abstract: A problem of optimally purchasing electricity at a real-valued spot price (that is, with potentially negative cost) has been recently addressed in De Angelis, Ferrari and Moriarty (2015) [SIAM J. Control Optim. 53(3)]. This problem can be considered one of irreversible investment with a cost functional which is non convex with respect to the control variable. In this paper we study the optimal entry into this investment plan. The optimal entry policy can have an irregular boundary arising from this non convexity, with a kinked shape.

Recommendations

• Optimal Boundary Surface for Irreversible Investment with Stochastic Costs
• Irreversible investment with fixed adjustment costs: a stochastic impulse control approach
• Optimal partially reversible investment with entry decision and general production function
• On an irreversible investment problem with two-factor uncertainty
• On irreversible investment

Cites work

• A class of solvable singular stochastic control problems
• A nonconvex singular stochastic control problem and its related optimal stopping boundaries
• A stochastic partially reversible investment problem on a finite time-horizon: free-boundary analysis
• An investment model with entry and exit decisions
• Connections between Optimal Stopping and Singular Stochastic Control I. Monotone Follower Problems
• Electricity prices and power derivatives: evidence from the Nordic Power Exchange
• Equivalent models for finite-fuel stochastic control
• scientific article; zbMATH DE number 1817636 (Why is no real title available?)
• scientific article; zbMATH DE number 5016447 (Why is no real title available?)
• scientific article; zbMATH DE number 51724 (Why is no real title available?)
• scientific article; zbMATH DE number 158461 (Why is no real title available?)
• Investment and the Valuation of Firms When There is an Option to Shut Down
• Mathematical methods for financial markets.
• ON THE AMERICAN OPTION PROBLEM
• On the optimal stopping problem for one-dimensional diffusions.
• Optimal partially reversible investment with entry decision and general production function
• Optimal Switching in an Economic Activity under Uncertainty

This page was built for publication: Optimal entry to an irreversible investment plan with non convex costs

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q1687372)