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arXiv · 2107.11735

A problem of optimal switching and singular control with discretionary stopping in portfolio selection

Junkee Jeon·Hyeng Keun Koo
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Abstract

In this paper we study the optimization problem of an economic agent who chooses a job and the time of retirement as well as consumption and portfolio of assets. The agent is constrained in the ability to borrow against future income. We transform the problem into a dual two-person zero-sum game, which involves a controller, who is a minimizer and chooses a non-increasing process, and a stopper, who is a maximizer and chooses a stopping time. We derive the Hamilton-Jacobi- Bellman quasi-variational inequality(HJBQV) of a max-min type arising from the game. We provide a solution to the HJBQV and verification that it is the value of the game. We establish a duality result which allows to derive the optimal strategies and value function of the primal problem from those of the dual problem.

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Junkee Jeon, Hyeng Keun Koo. 2021-07-25. A problem of optimal switching and singular control with discretionary stopping in portfolio selection. https://arxiv.org/abs/2107.11735

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