Stochastic Optimal Impulse Control Of Jump Diffusions With Application To Exchange Rate

Download or read book Stochastic Optimal Impulse Control of Jump Diffusions with Application to Exchange Rate written by Sandun C. Perera and published by . This book was released on 2009 with total page 278 pages. Available in PDF, EPUB and Kindle. Book excerpt: We generalize the theory of stochastic impulse control of jump diffusions introduced by Â̂̂ksendal and Sulem (2004) with milder assumptions. In particular, we assume that the original process is affected by the interventions. We also generalize the optimal central bank intervention problem including market reaction introduced by Moreno (2007), allowing the exchange rate dynamic to follow a jump diffusion process. We furthermore generalize the approximation theory of stochastic impulse control problems by a sequence of iterated optimal stopping problems which is also introduced in Âksendal and Sulem (2004). We develop new results which allow us to reduce a given impulse control problem to a sequence of iterated optimal stopping problems even though the original process is affected by interventions.