Numerical method for optimal stopping of piecewise deterministic Markov processes

Abstract

We propose a numerical method to approximate the value function for the optimal stopping problem of a piecewise deterministic Markov process (PDMP). Our approach is based on quantization of the post jump location—inter-arrival time Markov chain naturally embedded in the PDMP, and path-adapted time discretization grids. It allows us to derive bounds for the convergence rate of the algorithm and to provide a computable ε-optimal stopping time. The paper is illustrated by a numerical example.