On the one-dimensional optimal switching problem

On the one-dimensional optimal switching problem

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Article ID: iaor20102613
Volume: 35
Issue: 1
Start Page Number: 140
End Page Number: 159
Publication Date: Feb 2010
Journal: Mathematics of Operations Research
Authors: ,
Abstract:

We explicitly solve the optimal switching problem for one-dimensional diffusions by directly using the dynamic programming principle and the excessive characterization of the value function. The shape of the value function and the smooth fit principle then can be proved using the properties of concave functions.

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