Impulse Control of a Linear Diffusion: an Explicitly Solvable Problem

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• Mihail Zervos (London School of Economics)
• Wednesday 20 April 2022, 10:00-11:00
• Seminar Room 1, Newton Institute.

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FD2W03 - Optimal control and fractional dynamics

We consider a stochastic impulse control problem that is motivated by several applications in areas such as the optimal cashflow management or the optimal exploitation of a natural resource.  In particular, we consider a stochastic system whose uncontrolled state dynamics are modelled by a non-explosive positive linear diffusion.  The control that can be applied to this system takes the form of one-sided impulsive action. The objective of the control problem is to maximise a discounted performance criterion that rewards the effect of control action but involves a fixed cost at each time of a control intervention.  We derive the complete solution to this problem under general assumptions. It turns out that the solution can take four qualitatively different forms. In two of the four cases, there exist only $\varepsilon$-optimal control strategies.  

This talk is part of the Isaac Newton Institute Seminar Series series.

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