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arXiv · 1411.3981

Dynamic programming for discrete-time finite horizon optimal switching problems with negative switching costs

Randall Martyr
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Abstract

This paper studies a discrete-time optimal switching problem on a finite horizon. The underlying model has a running reward, terminal reward and signed (positive and negative) switching costs. Using the martingale approach to optimal stopping problems, we extend a well known explicit dynamic programming method for computing the value function and the optimal strategy to the case of signed switching costs.

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Randall Martyr. 2014-11-14. Dynamic programming for discrete-time finite horizon optimal switching problems with negative switching costs. https://doi.org/10.1017/apr.2016.30

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