XVII Workshop on Quantitative Finance -- Session on MATHEMATICAL FINANCE II (Sala Azzurra)
speaker: Giorgio Ferrari
speaker: John Moriarty
timetable:
Fri 29 Jan, 11:00 - 13:00, Sala Azzurra
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communication: A solvable two-dimensional degenerate singular stochastic control problem with non convex costs
speaker: Tiziano De Angelisspeaker: Giorgio Ferrari
speaker: John Moriarty
abstract: In this paper we provide a complete theoretical analysis of a two-dimensional degenerate non convex singular stochastic control problem. The optimisation is motivated by a storage-consumption model in an electricity market, and features a stochastic real-valued spot price modelled by Brownian motion. We find analytical expressions for the value function, the optimal control and the boundaries of the action and inaction regions. The optimal policy is characterised in terms of two monotone and discontinuous repelling free boundaries, although part of one boundary is constant and the smooth fit condition holds there.
timetable:
Fri 29 Jan, 11:00 - 13:00, Sala Azzurra
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