Optimal switching problems with an infinite set of modes: An approach by randomization and constrained backward SDEs

STOCHASTIC PROCESSES AND THEIR APPLICATIONS

卷:130

Article

Fuhrman, Marco¹  Morlais, Marie-Amelie² 

[1] Univ Milan, Dipartimento Matemat, Via Saldini 50, I-20133 Milan, Italy

[2] Le Mans Univ, Lab Manceau Math, Ave Olivier Messiaen, F-72085 Le Mans 9, France

关键词: Stochastic optimal switching;    Backward SDEs;    Randomization of controls;   

DOI  :  10.1016/j.spa.2019.09.008

来源: Elsevier

【 摘 要 】

We address a general optimal switching problem over finite horizon for a stochastic system described by a differential equation driven by Brownian motion. The main novelty is the fact that we allow for infinitely many modes (or regimes, i.e. the possible values of the piecewise-constant control process). We allow all the given coefficients in the model to be path-dependent, that is, their value at any time depends on the past trajectory of the controlled system. The main aim is to introduce a suitable (scalar) backward stochastic differential equation (BSDE), with a constraint on the martingale part, that allows to give a probabilistic representation of the value function of the given problem. This is achieved by randomization of control, i.e. by introducing an auxiliary optimization problem which has the same value as the starting optimal switching problem and for which the desired BSDE representation is obtained. In comparison with the existing literature we do not rely on a system of reflected BSDE nor can we use the associated Hamilton-Jacobi-Bellman equation in our non-Markovian framework. (C) 2019 Elsevier B.V. All rights reserved.

【 授权许可】

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