Advances in Applied Probability

Dynamic programming for discrete-time finite-horizon optimal switching problems with negative switching costs

R. Martyr

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Abstract

In this paper we study a discrete-time optimal switching problem on a finite horizon. The underlying model has a running reward, terminal reward, and signed (positive and negative) switching costs. Using optimal stopping theory for discrete-parameter stochastic processes, we extend a well-known explicit dynamic programming method for computing the value function and the optimal strategy to the case of signed switching costs.

Article information

Source
Adv. in Appl. Probab., Volume 48, Number 3 (2016), 832-847.

Dates
First available in Project Euclid: 19 September 2016

Permanent link to this document
https://projecteuclid.org/euclid.aap/1474296317

Mathematical Reviews number (MathSciNet)
MR3568894

Zentralblatt MATH identifier
1348.93282

Subjects
Primary: 93E20: Optimal stochastic control
Secondary: 60G40: Stopping times; optimal stopping problems; gambling theory [See also 62L15, 91A60] 62P20: Applications to economics [See also 91Bxx]

Keywords
Optimal switching stopping time optimal stopping problem Snell envelope

Citation

Martyr, R. Dynamic programming for discrete-time finite-horizon optimal switching problems with negative switching costs. Adv. in Appl. Probab. 48 (2016), no. 3, 832--847. https://projecteuclid.org/euclid.aap/1474296317


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