Optimality of refraction strategies for spectrally negative Lévy processes

DOI10.1137/15M1051208zbMATH Open1343.49031arXiv1504.03496OpenAlexW2963610185MaRDI QIDQ2807401FDOQ2807401

Daniel Hernández-Hernández, José Luis Pérez Garmendia, Kazutoshi Yamazaki

Publication date: 20 May 2016

Published in: SIAM Journal on Control and Optimization (Search for Journal in Brave)

Abstract: We revisit a stochastic control problem of optimally modifying the underlying spectrally negative Levy process. A strategy must be absolutely continuous with respect to the Lebesgue measure, and the objective is to minimize the total costs of the running and controlling costs. Under the assumption that the running cost function is convex, we show the optimality of a refraction strategy. We also obtain the convergence of the optimal refraction strategies and the value functions, as the control set is enlarged, to those in the relaxed case without the absolutely continuous assumption. Numerical results are further given to confirm these analytical results.

Full work available at URL: https://arxiv.org/abs/1504.03496

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zbMATH Keywords

optimalitystochastic controlscale functionsrefracted Lévy processes

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Numerical optimization and variational techniques (65K10) Variational inequalities (49J40) Existence of optimal solutions to problems involving randomness (49J55) Optimal stochastic control (93E20)

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Cited In (13)

• On the Bailout Dividend Problem for Spectrally Negative Markov Additive Models
• On optimal joint reflective and refractive dividend strategies in spectrally positive Lévy models
• Optimality of Two-Parameter Strategies in Stochastic Control
• On the optimality of the refraction-reflection strategies for Lévy processes
• REFRACTION–REFLECTION STRATEGIES IN THE DUAL MODEL
• Optimality of hybrid continuous and periodic barrier strategies in the dual model
• Approximation of \(N\)-player stochastic games with singular controls by mean field games
• On weighted occupation times for refracted spectrally negative Lévy processes
• On the optimality of periodic barrier strategies for a spectrally positive Lévy process
• On occupation times in the red of Lévy risk models
• Inventory Control for Spectrally Positive Lévy Demand Processes
• Optimal Periodic Replenishment Policies for Spectrally Positive Lévy Demand Processes
• MFGs for partially reversible investment

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