Constructing time-homogeneous generalized diffusions consistent with optimal stopping values

DOI10.1080/17442508.2010.522237MaRDI QIDQ3108376zbMATH OpenOpenAlexFDO

Authors Martin Klimmek, David Hobson

Publication date 3 January 2012

Published in Stochastics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1005.0160, http://wrap.warwick.ac.uk/41080/1/WRAP_Hobson_1005.0160v1.pdf

zbMATH Keywords

generalized convexitygeneralized diffusionsinverse American option problemoptimal stopping

Mathematics Subject Classification ID

Stopping times; optimal stopping problems; gambling theory (60G40) Diffusion processes (60J60)

Abstract: Consider a set of discounted optimal stopping problems for a one-parameter family of objective functions and a fixed diffusion process, started at a fixed point. A standard problem in stochastic control/optimal stopping is to solve for the problem value in this setting. In this article we consider an inverse problem; given the set of problem values for a family of objective functions, we aim to recover the diffusion. Under a natural assumption on the family of objective functions we can characterise existence and uniqueness of a diffusion for which the optimal stopping problems have the specified values. The solution of the problem relies on techniques from generalised convexity theory

Recommendations

• On a class of optimal stopping problems for diffusions with discontinuous coefficients
• scientific article; zbMATH DE number 2163521
• Optimal Stopping of Regular Diffusions under Random Discounting
• On an Optimal Stopping Problem of Time Inhomogeneous Diffusion Processes

Cites work

• Convex Analysis
• Developments and perspectives of the Jahresbericht der DMV
• Exact volatility calibration based on a Dupire-type call-put duality for perpetual American options
• General duality for perpetual American options
• scientific article; zbMATH DE number 1478492 (Why is no real title available?)
• Mass transportation problems. Vol. 1: Theory. Vol. 2: Applications
• Numerical and analytical results for the transportation problem of Monge-Kantorovich
• Optimal Transport
• Pathological birth-and-death processes and the spectral theory of strings
• Recovering a time-homogeneous stock price process from perpetual option prices
• The geometry of optimal transportation

Cited in

(4)

• Iterative construction of the optimal Bermudan stopping time
• Model-independent no-arbitrage conditions on American put options
• Parameter dependent optimal thresholds, indifference levels and inverse optimal stopping problems
• An explicit martingale version of the one-dimensional Brenier's theorem with full marginals constraint

This page was built for publication: Constructing time-homogeneous generalized diffusions consistent with optimal stopping values

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q3108376)