Valuing Switching options with the moving-boundary method
提出一种基于移动边界法的新计算方法，将转换期权的自由边界问题转化为固定边界问题序列，并给出理论保证和数值示例，适用于复杂转换问题如收费协议和离岸-回岸决策。
Switching options can be deployed in various complex switching problems such as tolling agreements and the offshoring–backshoring problem. Closed form solutions to valuing switching options are not only hard, but also computationally intensive when solving numerically. We develop a new computational method to value switching options based on the moving boundary method. We show how the free boundary problem arising from switching options can be converted into a sequence of fixed boundary problems. We formulate the problem, and solve the optimal switching problem in two regimes over a finite time horizon. We establish the theoretical guarantees for this method (maximum principles, uniqueness and convergence). We demonstrate this with a numerical example and show the sensitivity of the solution with respect to problem parameters.