ON AN INTEGRAL EQUATION FOR THE FREE-BOUNDARY OF STOCHASTIC, IRREVERSIBLE INVESTMENT PROBLEMS

• 成果类型: Article
• 署名作者: Ferrari, Giorgio
• 署名单位: University of Bielefeld
• 刊物名称: ANNALS OF APPLIED PROBABILITY
• ISSN/ISSBN: 1050-5164
• DOI: 10.1214/13-AAP991
• 发表日期: 2015
• 页码: 150-176
• 关键词: one-dimensional diffusions; Representation theorem; connections; time

摘要

In this paper, we derive a new handy integral equation for the freeboundary of infinite time horizon, continuous time, stochastic, irreversible investment problems with uncertainty modeled as a one-dimensional, regular diffusion X. The new integral equation allows to explicitly find the freeboundary b(.) in some so far unsolved cases, as when the operating profit function is not multiplicatively separable and X is a three-dimensional Bessel process or a CEV process. Our result follows from purely probabilistic arguments. Indeed, we first show that b(X (t)) = l* (t), with l* the unique optional solution of a representation problem in the spirit of Bank El Karoui [Ann. Probab. 32 (2004) 1030-1067]; then, thanks to such an identification and the fact that l* uniquely solves a backward stochastic equation, we find the integral problem for the free-boundary.