On the smoothness of value functions

We prove that under standard Lipschitz and growth conditions, the value function of all optimal control problems for one-dimensional diffusions is twice differentiable, as long as the control space is compact and the volatility is uniformly bounded below, away from zero. Under similar conditions, the value function of any optimal stopping problem is differentiable.

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Year of publication:	2012
Authors:	Strulovici, Bruno ; Szydlowski, Martin
Publisher:	Evanston, IL : Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science
Subject:	Stochastic Control \| Super Contact \| Smooth Pasting \| Value Function

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Series:	Discussion Paper ; 1542
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	683195689 [GVK] hdl:10419/59687 [Handle] RePEc:nwu:cmsems:1542R [RePEc]
Classification:	C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; C62 - Existence and Stability Conditions of Equilibrium
Source:	EconStor

Persistent link: https://www.econbiz.de/10010286985