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A Numerical Method for Multidimensional Impulse and Barrier Control Problems

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  • Balikcioglu, Metin
  • Fackler, Paul L.

Abstract

We offer a unified numerical method to solve both impulse and barrier control problems in multidimensional state spaces. Our numerical approach is based on the link between optimal regime switching model and impulse and barrier control problems. This link results in a convenient representation of the optimality conditions for numerical solution methods. Using finite difference approximations for derivatives, the optimality conditions are transformed into an extended vertical linear complementarity problem which is solved using Newton type methods. The numerical approach is illustrated with several examples.

Suggested Citation

  • Balikcioglu, Metin & Fackler, Paul L., 2018. "A Numerical Method for Multidimensional Impulse and Barrier Control Problems," CEnREP Working Papers 277666, North Carolina State University, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:nccewp:277666
    DOI: 10.22004/ag.econ.277666
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    References listed on IDEAS

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    1. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, December.
    2. Bar-Ilan, Avner & Perry, David & Stadje, Wolfgang, 2004. "A generalized impulse control model of cash management," Journal of Economic Dynamics and Control, Elsevier, vol. 28(6), pages 1013-1033, March.
    3. Sunil Kumar & Kumar Muthuraman, 2004. "A Numerical Method for Solving Singular Stochastic Control Problems," Operations Research, INFORMS, vol. 52(4), pages 563-582, August.
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