Advances in Applied Probability

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

R. Martyr

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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

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

First available in Project Euclid: 19 September 2016

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Mathematical Reviews number (MathSciNet)

Zentralblatt MATH identifier

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]

Optimal switching stopping time optimal stopping problem Snell envelope


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.

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