Summary: A METHOD FOR COMPUTING
DOUBLE BAND POLICIES FOR
SWITCHING BETWEEN TWO DIFFUSIONS
Revised Version, March 1996
Running Title: Optimal Switching Between Two Diffusions
Florin Avram y
and
Fikri Karaesmen
y To whom all correspondence should be sent
Department of Mathematics
567 Lake Hall
Northeastern University
Boston, MA 02115
E­mail: avram@neu.edu
Phone: (617) 373­5231
Abstract: We develop a method for computing the optimal double band [b; B]
policy for switching between two diffusions with continuous rewards and switch­
ing costs. The two switch levels [b; B] are obtained as perturbations of the single
optimal switching point a of the control problem with no switching costs. More
precisely, we find that in the case of average reward problems the optimal switch

Source: Avram, Florin - Laboratoire de Mathématiques Appliquées, Université de Pau et des Pays de l'Adour

Collections: Mathematics