In this note we prove existence of a solution to a system of Markovian BSDEs with interconnected obstacles. A key feature of our system, and the main novelty of this paper, is that we allow for the driver fi of the i-th component of the Y-process to depend on all components of the Z-process....

Adopting a probabilistic approach we determine the optimal dividend payout policy of a firm whose surplus process follows a controlled arithmetic Brownian motion and whose cash flows are discounted at a stochastic dynamic rate. Dividends can be paid to shareholders at unrestricted rates so that...

In this paper we provide a complete theoretical analysis of a two-dimensional degenerate non convex singular stochastic control problem. The optimisation is motivated by a storage-consumption model in an electricity market, and features a stochastic real-valued spot price modelled by Brownian...

This paper analyses two-player nonzero-sum games of optimal stopping on a class of regular diffusions with singular boundary behaviour (in the sense of Itô and McKean (1974) [19], p. 108). We prove that Nash equilibria are realised by stopping the diffusion at the first exit time from suitable...

In this paper we establish a new connection between a class of 2-player nonzerosum games of optimal stopping and certain 2-player nonzero-sum games of singular control. We show that whenever a Nash equilibrium in the game of stopping is attained by hitting times at two separate boundaries, then...

A problem of optimally purchasing electricity at a real-valued spot price (that is, with potentially negative cost) has been recently addressed in De Angelis, Ferrari and Moriarty (2015) [SIAM J. Control Optim. 53(3)]. This problem can be considered one of irreversible investment with a cost...

We study the optimal stopping problem of pricing an American Put option on a Zero Coupon Bond (ZCB) in Musiela’s parametrization of the Heath–Jarrow–Morton (HJM) model for forward interest rates.

We study a continuous-time, finite horizon, stochastic partially reversible investment problem for a firm producing a single good in a market with frictions. The production capacity is modeled as a one-dimensional, time-homogeneous, linear diffusion controlled by a bounded variation process...

Alongside the British put option (Peskir and Samee [<italic>Appl. Math. Finance</italic>, 2011, <bold>18</bold>, 537--563]) we present a new call option where the holder enjoys the early exercise feature of American options whereupon his payoff (deliverable immediately) is the ‘best prediction’ of the European payoff...

Motivated by applications in option pricing theory (Peskir, 1997b), (Research Report No. 386, Dept. Theoret. Statist. Aarhus, 19 pp.) we formulate and solve the following problem. Given a standard Brownian motion B=(Bt)t[greater-or-equal, slanted]0 and a centered probability measure [mu] on...