Impulse Control with Random Reaction Periods: A Central Bank Intervention Problem
Operations Research Letters, 40, 425-430, 2012
14 Pages Posted: 24 Apr 2012 Last revised: 27 Mar 2014
Date Written: July 26, 2012
Abstract
We model an impulse control problem when the controller's action affects the state as well as the dynamics of the state process for a random amount of time. We apply our model to solve a central bank intervention problem in the foreign exchange market when the market observes and reacts to the bank's interventions.
Keywords: impulse control, central bank interventions, market reactions, variational inequality
JEL Classification: E58
Suggested Citation: Suggested Citation
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