Announced Regime Switch: Optimal Policy for Transition Period

One-for-One Period Policy and its Optimal Solution

In this paper we introduce the optimal solution for a simple and yet practical inventory policy with the important characteristic which eliminates the uncertainty in demand for suppliers. In this new policy which is different from the classical inventory policies, the time interval between any two consecutive orders is fixed and the quantity of each order is one. Assuming the fixed ordering cos...

Optimal Monetary Policy Regime Switches∗

Given structural shifts in the economy, optimal simple monetary policy rules may respond with switches in their policy parameters. When the growth rate, inter-temporal preferences, or volatilities switch, the monetary authority chooses regime-dependent policy parameters to maximize welfare. These optimized policy parameters may differ across regimes and from the optimal choice of parameters for...

Optimal Investment Policy for Real Option Problems with Regime Switching

Real option analysis (ROA) is a way of valuing real assets by invoking option pricing theory. In contrast to the traditional net present value approach, ROA makes it possible to explicitly incorporating management flexibility. Because of such advantages, ROA has become an important tool for project valuation and is widely used in practice. In this paper, we develop a real option model with regi...

Optimal EOQ for Announced Price Increases in Infinite Horizon

Optimal multi-period mean-variance policy under no-shorting constraint

We consider in this paper the mean-variance formulation in multiperiod portfolio selection under no-shorting constraint. Recognizing the structure of a piecewise quadratic value function, we prove that the optimal portfolio policy is piecewise linear with respect to the current wealth level, and derive the semi-analytical expression of the piecewise quadratic value function. One prominent featu...