Optimal stopping and free boundary characterizations for some Brownian control problems

DOI10.1214/08-AAP525zbMATH Open1158.93032arXiv0901.2474OpenAlexW3099299885MaRDI QIDQ2378635FDOQ2378635

Authors: Amarjit Budhiraja, Kevin Ross 

Publication date: 13 January 2009

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Abstract: A singular stochastic control problem with state constraints in two-dimensions is studied. We show that the value function is $C^1$ and its directional derivatives are the value functions of certain optimal stopping problems. Guided by the optimal stopping problem, we then introduce the associated no-action region and the free boundary and show that, under appropriate conditions, an optimally controlled process is a Brownian motion in the no-action region with reflection at the free boundary. This proves a conjecture of Martins, Shreve and Soner [SIAM J. Control Optim. 34 (1996) 2133--2171] on the form of an optimal control for this class of singular control problems. An important issue in our analysis is that the running cost is Lipschitz but not $C^1$. This lack of smoothness is one of the key obstacles in establishing regularity of the free boundary and of the value function. We show that the free boundary is Lipschitz and that the value function is $C^2$ in the interior of the no-action region. We then use a verification argument applied to a suitable $C^2$ approximation of the value function to establish optimality of the conjectured control.

Full work available at URL: https://arxiv.org/abs/0901.2474

Recommendations

• Singular stochastic control and optimal stopping
• scientific article; zbMATH DE number 3879838
• Connections between Optimal Stopping and Singular Stochastic Control I. Monotone Follower Problems
• Connections Between Optimal Stopping and Singular Stochastic Control II. Reflected Follower Problems
• scientific article; zbMATH DE number 2064421

zbMATH Keywords

free boundaryHamilton-Jacobi-Bellman equationsoptimal stoppingviscosity solutionsBrownian control problem\(\epsilon\)-optimal stopping timesingular control with state constrains

Mathematics Subject Classification ID

Nonlinear elliptic equations (35J60) Existence of optimal solutions belonging to restricted classes (Lipschitz controls, bang-bang controls, etc.) (49J30) Viscosity solutions to Hamilton-Jacobi equations in optimal control and differential games (49L25) Stopping times; optimal stopping problems; gambling theory (60G40) Optimal stochastic control (93E20)

Cites Work

• Convex Analysis
• Stochastic differential equations with reflecting boundary conditions
• Title not available (Why is that?)
• Title not available (Why is that?)
• Impulse Control of Brownian Motion
• Title not available (Why is that?)
• The regularity of free boundaries in higher dimensions
• Connections between Optimal Stopping and Singular Stochastic Control I. Monotone Follower Problems
• Singular control with state constraints on unbounded domain
• A class of singular stochastic control problems
• Some solvable stochastic control problemst^†
• Title not available (Why is that?)
• Sequencing and Routing in Multiclass Queueing Networks Part II: Workload Relaxations
• Scheduling networks of queues: Heavy traffic analysis of a simple open network
• Connections Between Optimal Stopping and Singular Stochastic Control II. Reflected Follower Problems
• A Numerical Method for Solving Singular Stochastic Control Problems
• A large deviations approach to asymptotically optimal control of crisscross network in heavy traffic
• Existence of optimal controls for singular control problems with state constraints
• Regularity of the Value Function for a Two-Dimensional Singular Stochastic Control Problem
• A connection between singular stochastic control and optimal stopping
• Boundary regulatity and uniqueness for an elliptic equations with gradient constraint
• A second order elliptic equation with gradient constraint
• In search of sensitivity in network optimization
• Heavy Traffic Convergence of a Controlled, Multiclass Queueing System
• Title not available (Why is that?)

Cited In (12)

• Average Optimal Singular Control and a Related Stopping Problem
• Connections Between Optimal Stopping and Singular Stochastic Control II. Reflected Follower Problems
• Title not available (Why is that?)
• Stochastic nonzero-sum games: a new connection between singular control and optimal stopping
• Optimal control problems with stopping constraints
• A Singular Stochastic Control Problem with Interconnected Dynamics
• Singular stochastic control and optimal stopping
• Singular control of (reflected) Brownian motion: a computational method suitable for queueing applications
• The dividend problem with a finite horizon
• Minimizing the ruin probability allowing investments in two assets: a two-dimensional problem
• A note on two-sided stochastic control problems
• Characterization of stochastic control with optimal stopping in a Sobolev space

This page was built for publication: Optimal stopping and free boundary characterizations for some Brownian control problems

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q2378635)