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Stochastic optimal multi-modes switching with a viscosity solution approach

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  • El Asri, Brahim

Abstract

We consider the problem of optimal multi-modes switching in finite horizon, when the state of the system, including the switching cost functions are arbitrary (gij(t,x)≥0). We show existence of the optimal strategy, via a verification theorem. Finally, when the state of the system is a Markov process, we show that the vector of value functions of the optimal problem is the unique viscosity solution to the system of m variational partial differential inequalities with inter-connected obstacles.

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  • El Asri, Brahim, 2013. "Stochastic optimal multi-modes switching with a viscosity solution approach," Stochastic Processes and their Applications, Elsevier, vol. 123(2), pages 579-602.
    • Handle: RePEc:eee:spapps:v:123:y:2013:i:2:p:579-602
    DOI: 10.1016/j.spa.2012.09.007
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    Cited by:

    1. Kiyoshi Suzuki, 2021. "Infinite-Horizon Optimal Switching Regions for a Pair-Trading Strategy with Quadratic Risk Aversion Considering Simultaneous Multiple Switchings: A Viscosity Solution Approach," Mathematics of Operations Research, INFORMS, vol. 46(1), pages 336-360, February.

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