Dynamic contract trading in spectrum markets

Abstract

We address the question of optimal trading of bandwidth (service) contracts in wireless spectrum markets, for the primary spectrum providers. We propose a structured spectrum market and consider two basic types of spectrum contracts that can help attain desired flexibilities and tradeoffs in terms of service quality, spectrum usage efficiency and pricing: long-term guaranteed-bandwidth contracts, and short-term opportunistic-access contracts. A primary provider (seller) creates and maintains a portfolio composed of an appropriate mix of these two types of contracts. The optimal contract trading question in this context amounts to how the spectrum contract portfolio of a seller in the spectrum market should be dynamically adjusted, so as to maximize return subject to meeting the bandwidth demands of its own subscribers. We formulate the optimal contract trading question as a stochastic dynamic programming problem, and obtain structural properties of the optimal dynamic trading strategy that takes into account the current market prices of the contracts and the subscriber demand process in the decision-making.