Work

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

Year: 2016

Type: article

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.

Source: Advances in Applied Probability

DOI: 10.1017/apr.2016.30

Author: R. Martyr

Institution: University of Manchester

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: Engineering and Physical Sciences Research Council

Award: G542274445