On the one-dimensional optimal switching problem. (English) Zbl 1221.60058
Summary: We explicitly solve the optimal switching problem for one-dimensional diffusions by directly using the dynamic programming principle and the excessive characterization of the value function. The shape of the value function and the smooth fit principle can then be proved using the properties of concave functions.
MSC:
60G40 | Stopping times; optimal stopping problems; gambling theory |
60J60 | Diffusion processes |
93E20 | Optimal stochastic control |