On a switching control problem with càdlàg costs

DOI10.1080/17442508.2021.1914618zbMATH Open1496.60038arXiv1907.03401OpenAlexW3156811101MaRDI QIDQ5086897FDOQ5086897

Authors: Said Hamadène, Héctor Jasso-Fuentes, Yamid A. Osorio-Agudelo 

Publication date: 8 July 2022

Published in: Stochastics (Search for Journal in Brave)

Abstract: This work addresses a switching control problem under which the cost associated with the changes of regimes is allowed to have discontinuities in time. Our main contribution is to show several characterizations of the optimal cost function as well as the existence of "-optimal control policies. As a by-product, we also study the existence and uniqueness of solutions of a system of backward stochastic differential equations whose barriers (or obstacles) are discontinuous (in fact of c`adl`ag type) and depend itself on the unknown solution. At the last part of the paper, we study the case when an underlying diffusion is part of the dynamic of the system. In this special case, the optimal payoff becomes a weak solution of the HJB system of PDEs with obstacles which is of quasi-variational type. This paper is somehow a continuation of the papers [8, 17] that consider continuous costs.

Full work available at URL: https://arxiv.org/abs/1907.03401

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zbMATH Keywords

backward stochastic differential equationsswitching controlviscosity solutions\(\varepsilon\)-optimal strategies

Mathematics Subject Classification ID

Applications of statistics to economics (62P20) Corporate finance (dividends, real options, etc.) (91G50) Stopping times; optimal stopping problems; gambling theory (60G40) Optimal stochastic control (93E20)

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Cited In (2)

• Discrete-time switching control in random walks
• Title not available (Why is that?)

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