Finite-horizon optimal multiple switching with signed switching costs

DOI10.1287/MOOR.2016.0783zbMATH Open1350.93096arXiv1411.3971OpenAlexW1850297028MaRDI QIDQ2833110FDOQ2833110

Authors: Randall Martyr 

Publication date: 16 November 2016

Published in: Mathematics of Operations Research (Search for Journal in Brave)

Abstract: This paper is concerned with optimal switching over multiple modes in continuous time and on a finite horizon. The performance index includes a running reward, terminal reward and switching costs that can belong to a large class of stochastic processes. Particularly, the switching costs are modelled by right-continuous with left-limits processes that are quasi-left-continuous and can take both positive and negative values. We provide sufficient conditions leading to a well known probabilistic representation of the value function for the switching problem in terms of interconnected Snell envelopes. We also prove the existence of an optimal strategy within a suitable class of admissible controls, defined iteratively in terms of the Snell envelope processes.

Full work available at URL: https://arxiv.org/abs/1411.3971

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zbMATH Keywords

real optionsstopping timesoptimal stopping problemsoptimal switchingSnell envelope

Mathematics Subject Classification ID

Applications of statistics to economics (62P20) Dynamic programming (90C39) Stopping times; optimal stopping problems; gambling theory (60G40) Optimal stochastic control (93E20)

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Cited In (20)

• A full balance sheet two-mode optimal switching problem
• System of variational inequalities with interconnected obstacles
• A finite horizon optimal multiple switching problem
• Optimal switching for alternating processes
• On a switching control problem with càdlàg costs
• A study of optimal switching problem in limited-cycle with multiple periods
• Optimal multi-modes switching problem in infinite horizon
• An investment model with switching costs and the option to abandon
• Discrete-time risk-aware optimal switching with non-adapted costs
• On the finite horizon optimal switching problem with random lag
• Switching problems with controlled randomisation and associated obliquely reflected BSDEs
• A Method for Computing Double Band Policies for Switching between Two Diffusions
• Reflected BSDEs in non-convex domains
• Existence, uniqueness and regularity of solutions to systems of nonlocal obstacle problems related to optimal switching
• A two-scale scheme for finite horizon switching problems with delays
• Infinite horizon impulse control of stochastic functional differential equations driven by Lévy processes
• A finite horizon optimal switching problem with memory and application to controlled SDDEs
• Dynamic programming for discrete-time finite-horizon optimal switching problems with negative switching costs
• A probabilistic verification theorem for the finite horizon two-player zero-sum optimal switching game in continuous time
• Management strategies for run-of-river hydropower plants: an optimal switching approach

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