A stochastic partially reversible investment problem on a finite time-horizon: Free-boundary analysis

De Angelis T, Ferrari G (2014)
Stochastic Processes and their Applications 124(12): 4080-4119.

Zeitschriftenaufsatz | Veröffentlicht | Englisch
 
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Autor/in
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Abstract / Bemerkung
We study a continuous-time, finite horizon, stochastic partially reversible investment problem for a firm producing a single good in a market with frictions. The production capacity is modeled as a one-dimensional, time-homogeneous, linear diffusion controlled by a bounded variation process which represents the cumulative investment disinvestment strategy. We associate to the investment disinvestment problem a zero-sum optimal stopping game and characterize its value function through a free-boundary problem with two moving boundaries. These are continuous, bounded and monotone curves that solve a system of non-linear integral equations of Volterra type. The optimal investment disinvestment strategy is then shown to be a diffusion reflected at the two boundaries. (C) 2014 Elsevier B.V. All rights reserved.
Stichworte
problem; Skorokhod reflection; optimal stopping games; Zero-sum; Free-boundary problems; Singular stochastic control; Partially reversible investment
Erscheinungsjahr
2014
Zeitschriftentitel
Stochastic Processes and their Applications
Band
124
Ausgabe
12
Seite(n)
4080-4119
ISSN
0304-4149
Page URI
https://pub.uni-bielefeld.de/record/2705522

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De Angelis T, Ferrari G. A stochastic partially reversible investment problem on a finite time-horizon: Free-boundary analysis. Stochastic Processes and their Applications. 2014;124(12):4080-4119.
De Angelis, T., & Ferrari, G. (2014). A stochastic partially reversible investment problem on a finite time-horizon: Free-boundary analysis. Stochastic Processes and their Applications, 124(12), 4080-4119. doi:10.1016/j.spa.2014.07.008
De Angelis, T., and Ferrari, G. (2014). A stochastic partially reversible investment problem on a finite time-horizon: Free-boundary analysis. Stochastic Processes and their Applications 124, 4080-4119.
De Angelis, T., & Ferrari, G., 2014. A stochastic partially reversible investment problem on a finite time-horizon: Free-boundary analysis. Stochastic Processes and their Applications, 124(12), p 4080-4119.
T. De Angelis and G. Ferrari, “A stochastic partially reversible investment problem on a finite time-horizon: Free-boundary analysis”, Stochastic Processes and their Applications, vol. 124, 2014, pp. 4080-4119.
De Angelis, T., Ferrari, G.: A stochastic partially reversible investment problem on a finite time-horizon: Free-boundary analysis. Stochastic Processes and their Applications. 124, 4080-4119 (2014).
De Angelis, Tiziano, and Ferrari, Giorgio. “A stochastic partially reversible investment problem on a finite time-horizon: Free-boundary analysis”. Stochastic Processes and their Applications 124.12 (2014): 4080-4119.