An approximation scheme for impulse control with random reaction periods

We propose an approximation scheme for impulse control models with random reaction periods (ICRRP) and show that the optimal solutions can be found by solving a sequence of optimal stopping problems. Our work enhances viability of the existing ICRRP framework for applications as well as the general literature on stochastic control theory. The efficacy of our approximation scheme is validated by applying it to compute a market-reaction-adjusted optimal central bank intervention policy for a country.