Multidimensional singular control and related skorokhod problem : suficient conditions for the characterization of optimal controls / Jodi Dianetti and Giorgio Ferrari
VerfasserDianetti, Jodi ; Ferrari, Giorgio
ErschienenBielefeld, Germany : Center for Mathematical Economics (IMW), March 2021
Elektronische Ressource
Umfang1 Online-Ressource (37 Seiten)
SerieCenter for Mathematical Economics Working papers ; 645
SchlagwörterWahrscheinlichkeitstheorie / Stochastische Differentialgleichung / Optimierung / Steuerung
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Multidimensional singular control and related skorokhod problem [0.59 mb]

We characterize the optimal control for a class of singular stochastic control problems as the unique solution to a related Skorokhod re ection problem. The considered optimization problems concern the minimization of a discounted cost functional over an infinite time-horizon through a process of bounded variation a ecting an Itô-diffusion. The setting is multidimensional, the dynamics of the state and the costs are convex, the volatility matrix can be constant or linear in the state. We prove that the optimal control acts only when the underlying di usion attempts to exit the so-called waiting region, and that the direction of this action is prescribed by the derivative of the value function. Our approach is based on the study of a suitable monotonicity property of the derivative of the value function through its interpretation as the value of an optimal stopping game. Such a monotonicity allows to construct nearly optimal policies which re ect the underlying di usion at the boundary of approximating waiting regions. The limit of this approximation scheme then provides the desired characterization. Our result applies to a relevant class of linear-quadratic models, among others. Furthermore, it allows to construct the optimal control in degenerate and non degenerate settings considered in the literature, where this important aspect was only partially addressed.

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