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Stochastic impulse control with regime-switching dynamics

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  • Korn, Ralf
  • Melnyk, Yaroslav
  • Seifried, Frank Thomas

Abstract

Optimal product management problems with multiple product generations in continuous time lead to the consideration of dynamic optimal control problems that feature both intervention costs and partially controlled regime shifts. We therefore investigate and solve such stochastic impulse control problems with regime-switching in a general setting. We analyze the associated coupled systems of quasi-variational inequalities in suitable Sobolev spaces, and we establish a direct approach to construct both the value function and optimal strategies. Our results in particular yield a numerical method for the computation of the optimal value function and the associated strategies.

Suggested Citation

  • Korn, Ralf & Melnyk, Yaroslav & Seifried, Frank Thomas, 2017. "Stochastic impulse control with regime-switching dynamics," European Journal of Operational Research, Elsevier, vol. 260(3), pages 1024-1042.
    • Handle: RePEc:eee:ejores:v:260:y:2017:i:3:p:1024-1042
    DOI: 10.1016/j.ejor.2016.12.029
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