A stochastic partially reversible investment problem on a finite time-horizon: free-boundary analysis
From MaRDI portal
Publication:744236
DOI10.1016/J.SPA.2014.07.008zbMATH Open1295.93073arXiv1303.6189OpenAlexW3124311599WikidataQ59898401 ScholiaQ59898401MaRDI QIDQ744236FDOQ744236
Authors: Tiziano De Angelis, Giorgio Ferrari 
Publication date: 6 October 2014
Published in: Stochastic Processes and their Applications (Search for Journal in Brave)
Abstract: We study a continuous-time, finite horizon, stochastic partially reversible investment problem for a firm producing a single good in a market with frictions. The production capacity is modeled as a one-dimensional, time-homogeneous, linear diffusion controlled by a bounded variation process which represents the cumulative investment-disinvestment strategy. We associate to the investment-disinvestment problem a zero-sum optimal stopping game and characterize its value function through a free-boundary problem with two moving boundaries. These are continuous, bounded and monotone curves that solve a system of non-linear integral equations of Volterra type. The optimal investment-disinvestment strategy is then shown to be a diffusion reflected at the two boundaries.
Full work available at URL: https://arxiv.org/abs/1303.6189
Recommendations
- On an integral equation for the free-boundary of stochastic, irreversible investment problems
- On a stochastic, irreversible investment problem
- Identifying the free boundary of a stochastic, irreversible investment problem via the Bank-El Karoui representation theorem
- An irreversible investment problem with maintenance expenditure on a finite horizon: free boundary analysis
- Characterization of the optimal boundaries in reversible investment problems
- Explicit Solution of a Stochastic, Irreversible Investment Problem and Its Moving Threshold
- Optimal Boundary Surface for Irreversible Investment with Stochastic Costs
- Irreversible investment under Lévy uncertainty: an equation for the optimal boundary
- An integral equation approach for optimal investment policies with partial reversibility
- On a free boundary problem for an optimal investment problem with different interest rates
singular stochastic controlfree-boundary problemspartially reversible investmentSkorokhod reflection problemzero-sum optimal stopping games
Free boundary problems for PDEs (35R35) Stopping times; optimal stopping problems; gambling theory (60G40) Stochastic games, stochastic differential games (91A15) Stochastic models in economics (91B70) Optimal stochastic control (93E20)
Cites Work
- A change-of-variable formula with local time on curves
- Title not available (Why is that?)
- Title not available (Why is that?)
- Title not available (Why is that?)
- Optimal Stopping and the American Put
- Title not available (Why is that?)
- Title not available (Why is that?)
- Backward stochastic differential equations with reflection and Dynkin games
- Optimal stopping games and Nash equilibrium
- Optimal Stopping Games for Markov Processes
- Title not available (Why is that?)
- The Skorokhod problem in a time-dependent interval
- Hedging of American options under transaction costs
- Analytical pricing of American put options on a zero coupon bond in the Heath-Jarrow-Morton model
- On the Optimal Stopping Time Problem for Degenerate Diffusions
- Title not available (Why is that?)
- On degenerate elliptic-parabolic operators of second order and their associated diffusions
- Irreversible investment
- Generalized Kuhn-Tucker conditions for \(N\)-firm stochastic irreversible investment under limited resources
- On irreversible investment
- Optimal partially reversible investment with entry decision and general production function
- Connections between Optimal Stopping and Singular Stochastic Control I. Monotone Follower Problems
- A Class of Solvable Stochastic Investment Problems Involving Singular Controls
- A stochastic representation theorem with applications to optimization and obstacle problems.
- Optimal Control under a Dynamic Fuel Constraint
- Firing Costs and Labour Demand: How Bad is Eurosclerosis?
- On a stochastic, irreversible investment problem
- A Model for Reversible Investment Capacity Expansion
- Optimal Investment with Costly Reversibility
- Zero-sum stochastic differential games and backward equations
- Title not available (Why is that?)
- Irreversible investment and industry equilibrium
- Irreversible investment problems
- Connections between Singular Control and Optimal Switching
- Zero-sum Markov games with stopping and impulsive strategies
- Penalty method for finite horizon stopping problems
- Dynkin games and martingale methods
- Bounded Variation Singular Stochastic Control and Dynkin Game
- Connections between optimal stopping and singular stochastic control
- Explicit solution to an irreversible investment model with a stochastic production capacity
Cited In (19)
- On the singular control of exchange rates
- Irreversible investment with fixed adjustment costs: a stochastic impulse control approach
- On the Starting and Stopping Problem: Application in Reversible Investments
- A Dynkin Game on Assets with Incomplete Information on the Return
- Irreversible capital accumulation with economic impact
- Numerical solution of a free boundary problem associated to investments with instantaneous irreversible environmental effects
- Nash equilibria of threshold type for two-player nonzero-sum games of stopping
- Two-Sided Singular Control of an Inventory with Unknown Demand Trend
- Stochastic nonzero-sum games: a new connection between singular control and optimal stopping
- On an ergodic two-sided singular control problem
- A stochastic non-zero-sum game of controlling the debt-to-GDP ratio
- A reversible investment problem with capacity and demand in finite horizon: free boundary analysis
- Optimal Control of Debt-to-GDP Ratio in an $N$-State Regime Switching Economy
- Explicit Solution of a Stochastic, Irreversible Investment Problem and Its Moving Threshold
- Optimal Boundary Surface for Irreversible Investment with Stochastic Costs
- On a stochastic, irreversible investment problem
- Optimal entry to an irreversible investment plan with non convex costs
- Optimal partially reversible investment with entry decision and general production function
- The dividend problem with a finite horizon
This page was built for publication: A stochastic partially reversible investment problem on a finite time-horizon: free-boundary analysis
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q744236)
