We consider an optimal stochastic impulse control problem over an infinite time horizon motivated by a model of irreversible investment choices with fixed adjustment costs. By employing techniques of viscosity solutions and relying on semiconvexity arguments, we prove that the value function is a classical solution to the associated quasi-variational inequality. This enables us to characterize the structure of the continuation and action regions and construct an optimal control. Finally, we focus on the linear case, discussing, by a numerical analysis, the sensitivity of the solution with respect to the relevant parameters of the problem.
Federico S., Rosestolato M., Tacconi E. (2019). Irreversible investment with fixed adjustment costs: a stochastic impulse control approach. MATHEMATICS AND FINANCIAL ECONOMICS, 13(4), 579-616 [10.1007/s11579-019-00238-w].
Irreversible investment with fixed adjustment costs: a stochastic impulse control approach
Federico S.;
2019
Abstract
We consider an optimal stochastic impulse control problem over an infinite time horizon motivated by a model of irreversible investment choices with fixed adjustment costs. By employing techniques of viscosity solutions and relying on semiconvexity arguments, we prove that the value function is a classical solution to the associated quasi-variational inequality. This enables us to characterize the structure of the continuation and action regions and construct an optimal control. Finally, we focus on the linear case, discussing, by a numerical analysis, the sensitivity of the solution with respect to the relevant parameters of the problem.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.