Optimal stopping for processes with independent increments, and applications
G. Deligiannidis, H. Le, and S. Utev
Source: J. Appl. Probab. Volume 46, Number 4
(2009), 1130-1145.
Abstract
In this paper we present an explicit solution to the infinite-horizon optimal stopping problem for processes with stationary independent increments, where reward functions admit a certain representation in terms of the process at a random time. It is shown that it is optimal to stop at the first time the process crosses a level defined as the root of an equation obtained from the representation of the reward function. We obtain an explicit formula for the value function in terms of the infimum and supremum of the process, by making use of the Wiener--Hopf factorization. The main results are applied to several problems considered in the literature, to give a unified approach, and to new optimization problems from the finance industry.
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Links and Identifiers
Permanent link to this document: http://projecteuclid.org/euclid.jap/1261670693
Digital Object Identifier: doi:10.1239/jap/1261670693
Zentralblatt MATH identifier: 05665460
Mathematical Reviews number (MathSciNet): MR2582711
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Journal of Applied Probability
