A two-mode mean-field optimal switching problem for the full balance sheet

DOI10.1155/2014/159519MaRDI QIDQ462408zbMATH OpenOpenAlexWikidataFDO

Authors Boualem Djehiche, Ali Hamdi

Publication date 20 October 2014

Published in International Journal of Stochastic Analysis (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1411.5852

zbMATH Keywords

switchinglarge number of production linesoptimal expected yieldstwo-mode optimal switching problem of mean-field type

Mathematics Subject Classification ID

Production models (90B30) Control/observation systems governed by functional relations other than differential equations (such as hybrid and switching systems) (93C30) Optimal stochastic control (93E20)

Abstract: We formulate and solve a finite horizon full balance sheet two-modes optimal switching problem related to trade-off strategies between expected profit and cost yields. Given the current mode, this model allows for either a switch to the other mode or termination of the project, and this happens for both sides of the balance sheet. A novelty in this model is that the related obstacles are nonlinear in the underlying yields, whereas, they are linear in the standard optimal switching problem. The optimal switching problem is formulated in terms of a system of Snell envelopes for the profit and cost yields which act as obstacles to each other. We prove existence of a continuous minimal solution of this system using an approximation scheme and fully characterize the optimal switching strategy.

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Cited in

(5)

• The mean field optimal switching problem: variational inequality approach
• A full balance sheet two-mode optimal switching problem
• Mean-field optimal multi-modes switching problem: a balance sheet
• A balance sheet optimal multi-modes switching problem
• A two-mode mean-field optimal switching problem for the full balance sheet

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