A limited-feedback approximation scheme for optimal switching problems with execution delays

Magnus Perninge ()
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Magnus Perninge: Linnaeus University

Mathematical Methods of Operations Research, 2018, vol. 87, issue 3, No 2, 347-382

Abstract: Abstract We consider a type of optimal switching problems with non-uniform execution delays and ramping. Such problems frequently occur in the operation of economical and engineering systems. We first provide a solution to the problem by applying a probabilistic method. The main contribution is, however, a scheme for approximating the optimal control by limiting the information in the state-feedback. In a numerical example the approximation routine gives a considerable computational performance enhancement when compared to a conventional algorithm.

Keywords: Optimal switching; Impulse control; Real options; Delivery lag; Execution delay; Stopping time; Snell envelope; Numerical algorithm (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s00186-017-0620-2

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