Titelaufnahme

Titel
On the optimal boundary of a three-dimensional singular stochastic control problem arising in irreversible investment / Tiziano De Angelis, Salvatore Federico and Giorgio Ferrari
VerfasserDe Angelis, Tiziano In der Gemeinsamen Normdatei der DNB nachschlagen ; Federico, Salvatore In der Gemeinsamen Normdatei der DNB nachschlagen ; Ferrari, Giorgio In der Gemeinsamen Normdatei der DNB nachschlagen
ErschienenBielefeld : Center for Mathematical Economics (IMW), June 2014
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Elektronische Ressource
Umfang1 Online-Ressource (40 Seiten)
SerieCenter for Mathematical Economics Working papers ; 509
URNurn:nbn:de:hbz:6:2-57980 Persistent Identifier (URN)
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On the optimal boundary of a three-dimensional singular stochastic control problem arising in irreversible investment [0.53 mb]
Zusammenfassung

This paper examines a Markovian model for the optimal irreversible investment problem of a firm aiming at minimizing total expected costs of production. We model market uncertainty and the cost of investment per unit of production capacity as two independent one-dimensional regular diffusions, and we consider a general convex running cost function. The optimization problem is set as a three-dimensional degenerate singular stochastic control problem. We provide the optimal control as the solution of a Skorohod reflection problem at a suitable free-boundary surface. Such boundary arises from the analysis of a family of two-dimensional parameter-dependent optimal stopping problems and it is characterized in terms of the family of unique continuous solutions to parameter-dependent nonlinear integral equations of Fredholm type.

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