Journal of Applied Probability

On threshold strategies and the smooth-fit principle for optimal stopping problems

Stéphane Villeneuve

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Abstract

In this paper we investigate sufficient conditions that ensure the optimality of threshold strategies for optimal stopping problems with finite or perpetual maturities. Our result is based on a local-time argument that enables us to give an alternative proof of the smooth-fit principle. Moreover, we present a class of optimal stopping problems for which the propagation of convexity fails.

Article information

Source
J. Appl. Probab. Volume 44, Number 1 (2007), 181-198.

Dates
First available: 30 March 2007

Permanent link to this document
http://projecteuclid.org/euclid.jap/1175267171

Digital Object Identifier
doi:10.1239/jap/1175267171

Zentralblatt MATH identifier
1134.60338

Mathematical Reviews number (MathSciNet)
MR2312995

Subjects
Primary: 60G40: Stopping times; optimal stopping problems; gambling theory [See also 62L15, 91A60] 60J60: Diffusion processes [See also 58J65]

Keywords
Optimal stopping principle of smooth fit local time

Citation

Villeneuve, Stéphane. On threshold strategies and the smooth-fit principle for optimal stopping problems. Journal of Applied Probability 44 (2007), no. 1, 181--198. doi:10.1239/jap/1175267171. http://projecteuclid.org/euclid.jap/1175267171.


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