“Multidimensional singular control and related Skorokhod problem: sufficient conditions for the characterization of optimal controls”
Mercoledì 7 Luglio 2021, ore 14:30 - Aula 2BC30 + Zoom - Giorgio Ferrari
Singular stochastic control problems naturally arise in applications and are intimately related to variational inequalities and free-boundary problems. A key difficulty in the analysis of singular stochastic control problems in multiple dimensions concerns the characterization of an optimal policy, being the latter typically related to the construction of a stochastic process with reflecting boundary conditions. In this talk we show how to construct the optimal control for a class of singular stochastic control problems as the unique solution to a related Skorokhod reflection problem. The considered optimization problems concern the minimization of a discounted cost functional over an infinite time-horizon through a process of bounded variation affecting an Itô-diffusion. The setting is multidimensional, the dynamics of the state and the costs are convex, the volatility matrix can be constant or linear in the state. We prove that the optimal control acts only when the underlying diffusion attempts to exit the so-called waiting region, and that the direction of this action is prescribed by the derivative of the value function. Our approach is based on the study of a suitable monotonicity property of the derivative of the value function through its interpretation as the value of an optimal stopping game. Such a monotonicity allows to construct nearly optimal policies which reflect the underlying diffusion at the boundary of approximating waiting regions. The limit of this approximation scheme then provides the desired characterization. Our result applies to a relevant class of linear-quadratic models, among others. Furthermore, it allows to construct the optimal control in degenerate and non degenerate settings considered in the literature, where this important aspect was only partially addressed.
The talk is based on a joint work with Jodi Dianetti.