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Salvatore FEDERICO (Universita di Siena) "Irreversible Investment with Fixed Adjustment Costs: a Stochastic Impulse Control Approach"

February 4, 2019 @ 3:30 pm - 4:30 pm | Organizers: Peter TANKOV, Caroline HILLAIRET

1st Monday of each month
Time: 3:30 pm – 4:30 pm
Date: 04 th of February 2019
Place: Room 3105
Salvatore FEDERICO (Universita di Siena) “Irreversible Investment with Fixed Adjustment Costs: a Stochastic Impulse Control Approach”
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.