BSDE representations for optimal switching problems with controlled volatility

Kharroubi, Idris; Elie, Romuald

Kharroubi, Idris; Elie, Romuald (2014), BSDE representations for optimal switching problems with controlled volatility, Stochastics and Dynamics, 14, 3, p. n°1450003. http://dx.doi.org/10.1142/S0219493714500038

Type

Article accepté pour publication ou publié

External document link

http://hal.archives-ouvertes.fr/hal-00573428/fr/

Date

2014

Journal name

Stochastics and Dynamics

Volume

Number

Publisher

World Scientific

Pages

n°1450003

Abstract (EN)

This paper provides two different strong BSDE representations for optimal switching problems in the case where the dynamics of the underlying diffusion process depends on the current value of the switching mode. These new representations make use of either one-dimensional constrained BSDEs with jumps or multidimensional BSDEs with oblique reflections, thus extending the framework considered by Hu and Tang [11]. In particular, the numerical resolution of the corresponding switching problem can therefore be treated via the entirely probabilistic schemes presented in [3] or [7].

Subjects / Keywords

Reflected BSDE; Switching problems; Stochastic control