Dynamic programming for discrete-time finite-horizon optimal switching problems with negative switching costs

DOI10.1017/APR.2016.30MaRDI QIDQ2830883zbMATH OpenOpenAlexFDO

Authors Randall Martyr

Publication date 1 November 2016

Published in Advances in Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1411.3981, https://projecteuclid.org/euclid.aap/1474296317

zbMATH Keywords

stopping timeoptimal stopping problemoptimal switchingSnell envelope

Mathematics Subject Classification ID

Applications of statistics to economics (62P20) Stopping times; optimal stopping problems; gambling theory (60G40) Optimal stochastic control (93E20)

Abstract: This paper studies a discrete-time optimal switching problem on a finite horizon. The underlying model has a running reward, terminal reward and signed (positive and negative) switching costs. Using the martingale approach to optimal stopping problems, we extend a well known explicit dynamic programming method for computing the value function and the optimal strategy to the case of signed switching costs.

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(8)

• Two-parameter optimal stopping problem with switching costs
• Management strategies for run-of-river hydropower plants: an optimal switching approach
• Optimal switching for alternating processes
• Discrete-time risk-aware optimal switching with non-adapted costs
• Optimal switching between cash-flow streams
• Finite-horizon optimal multiple switching with signed switching costs
• Solving finite time horizon Dynkin games by optimal switching
• A Method for Computing Double Band Policies for Switching between Two Diffusions

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