Abstract: We contribute to the hybrid, e.g., mixed continuous-discrete dynamics of stochastic differential equations with jumps or Markov-switching models, and to its optimal control. Those systems allow the representation of random regime switches and are of growing importance in economics, finance, science and engineering. We introduce two new approaches to this area of stochastic optimal control: one is based on the finding of closed-form solutions, the other one on a discrete-time numerical approximation scheme. The presentation ends with a conclusion and an outlook to future studies.
|Erdem Kilic has a Ph.D. in financial economics with emphasis on financial econometrics and financial modeling. He is an Assistant Professor at the Department of Economics, MEF University in Istanbul. He has pursued postdoctoral research in financial economics at the Institute of Applied Mathemtics in METU, Ankara. His main research interests include financial economics and stochastic models in finance. Recently, he has been focusing on optimal asset pricing under asymmetric information, multiobjective portfolio selection models, and effects of consumer confidence dynamics on business activity.|
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