Connections between Singular Control and Optimal Switching

This paper builds a new theoretical connection between singular control of finite variation and optimal switching problems. This correspondence provides a novel method for solving high-dimensional singular control problems and enables us to extend the theory of reversible investment: Sufficient conditions are derived for the existence of optimal controls and for the regularity of value functions. Consequently, our regularity result links singular controls and Dynkin games through sequential optimal stopping problems. Key words. singular stochastic control, optimal switching, Dynkin games, reversible investment AMS subject classifications. 93E20, 49N60, 91A15, 91A55 DOI. 10.1137/060669024

• Type: Journal
• Year: 2008
• Where: SIAMCO
• Authors: Xin Guo, Pascal Tomecek
• Keywords: Optimal Switching Problems, SIAMCO 2008, Singular Control Problems, Singular Controls