DYNAMIC PROGRAMMING FOR DISCRETE-TIME FINITE-HORIZON OPTIMAL SWITCHING PROBLEMS WITH NEGATIVE SWITCHING COSTS

摘要

In this paper we study a discrete-time optimal switching problem on a finite horizon. The underlying model has a running reward, terminal reward, and signed (positive and negative) switching costs. Using optimal stopping theory for discrete-parameter stochastic processes, we extend a well-known explicit dynamic programming method for computing the value function and the optimal strategy to the case of signed switching costs.