A stochastic target formulation for optimal switching problems in finite horizon
Bouchard, Bruno (2009), A stochastic target formulation for optimal switching problems in finite horizon, Stochastics, 81, 2, p. 171 - 197. http://dx.doi.org/10.1080/17442500802327360
TypeArticle accepté pour publication ou publié
Taylor & Francis
171 - 197
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Abstract (EN)We consider a general optimal switching problem for a controlled diffusion and show that its value coincides with the value of a well-suited stochastic target problem associated to a diffusion with jumps. The proof consists in showing that the Hamilton-Jacobi-Bellman equations of both problems are the same and in proving a comparison principle for this equation. This provides a new family of lower bounds for the optimal switching problem, which can be computed by Monte-Carlo methods. This result has also a nice economical interpretation in terms of a firm's valuation.
Subjects / KeywordsViscosity solutions; Optimal Control
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Generalized stochastic target problems for pricing and partial hedging under loss constraints - Application in optimal book liquidation Bouchard, Bruno; Dang, Ngoc Minh (2013) Article accepté pour publication ou publié