TY  - GEN
AB  - This paper examines a Markovian model for the optimal irreversible investment
problem of a firm aiming at minimizing total expected costs of production. We model market
uncertainty and the cost of investment per unit of production capacity as two independent
one-dimensional regular diffusions, and we consider a general convex running cost function.
The optimization problem is set as a three-dimensional degenerate singular stochastic control
problem.
We provide the optimal control as the solution of a Skorohod reflection problem at a suitable
free-boundary surface. Such boundary arises from the analysis of a family of two-dimensional
parameter-dependent optimal stopping problems and it is characterized in terms of the family of
unique continuous solutions to parameter-dependent nonlinear integral equations of Fredholm
type.
DA  - 2014
KW  - irreversible investment
KW  - singular stochastic control
KW  - optimal stopping
KW  - freeboundary problems
KW  - nonlinear integral equations
LA  - eng
PY  - 2014
SN  - 0931-6558
SP  - 41-
TI  - On the Optimal Boundary of a Three-Dimensional Singular Stochastic Control Problem Arising in Irreversible Investment
UR  - https://nbn-resolving.org/urn:nbn:de:0070-pub-29015441
Y2  - 2024-11-22T05:37:46
ER  -