Finite-horizon optimal multiple switching with signed switching costs
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Publication:2833110
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.
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Cited in
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- A probabilistic verification theorem for the finite horizon two-player zero-sum optimal switching game in continuous time
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