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

See all articles by Alain Bensoussan

Alain Bensoussan

University of Texas at Dallas - Naveen Jindal School of Management

Hongwei Long

Department of Mathematics, Florida Atlantic University

Sandun Perera

University of Texas at Dallas - Naveen Jindal School of Management

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management

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

Bensoussan, Alain and Long, Hongwei and Perera, Sandun C. and Sethi, Suresh, Impulse Control with Random Reaction Periods: A Central Bank Intervention Problem (July 26, 2012). Operations Research Letters, 40, 425-430, 2012, Available at SSRN: https://ssrn.com/abstract=2043707 or http://dx.doi.org/10.2139/ssrn.2043707

Alain Bensoussan

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 West Campbell Rd
SM 30
Richardson, TX 75080-3021
United States
9728836117 (Phone)

HOME PAGE: http://www.utdallas.edu/~axb046100/

Hongwei Long

Department of Mathematics, Florida Atlantic University ( email )

Boca Raton, FL 33431
United States

Sandun C. Perera (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W. Campbell Road
Richardson, TX 75083-0688
United States

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W. Campbell Road, SM30
Richardson, TX 75080-3021
United States

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