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

  • R. Martyr (a1)

Abstract

In this paper we study 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 optimal stopping theory for discrete-parameter stochastic processes, 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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Corresponding author

* Current address: School of Mathematical Sciences, Queen Mary University of London, London E1 4NS, UK. Email address: r.martyr@qmul.ac.uk

References

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