A mixed singular/switching control problem with terminal cost for modulated diffusion processes

Abstract

In this paper, we study the regularity of the value function associated with a stochastic control problem involving two controls that act simultaneously on a modulated multidimensional diffusion process. The first is a switching control modelling a random clock. Whenever the random clock rings, the generator matrix is replaced by another, leading to a different dynamic for the finite state Markov chain of the modulated diffusion process. The second is a singular stochastic control that is executed on the process within each regime.