Geometry of distribution-constrained optimal stopping problems

DOI10.1007/S00440-017-0805-XMaRDI QIDQ1626603zbMATH OpenOpenAlexWikidataFDO

Authors Mathias Beiglböck, Manu Eder, Christiane Elgert, Uwe Schmock

Publication date 21 November 2018

Published in Zeitschrift für Wahrscheinlichkeitstheorie und Verwandte Gebiete (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://arxiv.org/abs/1612.01488

zbMATH Keywords

distribution-constrained optimal stoppinginverse first passage problemoptimal transportShiryaev's problem

Mathematics Subject Classification ID

Stopping times; optimal stopping problems; gambling theory (60G40) Martingales with discrete parameter (60G42) Martingales with continuous parameter (60G44)

Abstract: We adapt ideas and concepts developed in optimal transport (and its martingale variant) to give a geometric description of optimal stopping times of Brownian motion subject to the constraint that the distribution of the stopping time is a given probability. The methods work for a large class of cost processes. (At a minimum we need the cost process to be measurable and adapted. Continuity assumptions can be used to guarantee existence of solutions.) We find that for many of the cost processes one can come up with, the solution is given by the first hitting time of a barrier in a suitable phase space. As a by-product we recover classical solutions of the inverse first passage time problem / Shiryaev's problem.

Review text

This paper is about an optimisation problem regarding stopping times over a given filtered probability space that have a given distribution. Given an adapted process \(B\) and a cost function the aim is to find the stopping time \(\tau\) with distribution \(\mu\) that minimises the expected value of \(c(B,\tau)\). The authors show that if this cost function is lower semicontinuous and bounded from below, then the problem has a solution, in the case where \(B\) is a Brownian motion starting a point which has a given distribution and \(\mu\) has finite \(p_0\) norm for some \(p_0\geq 0\). Their second result is a monotonicity principle. According to this, there exists a set \(\Gamma\) of paths and times (associated with each path) such that the Brownian paths at the values of the optimal stopping time belong to \(\Gamma\) with probability 1 and furthermore for all pairs of paths and times \((\omega,t) \in \Gamma\) the expected cost of stopping earlier than time \(t\) is higher for any stopping time \(\sigma\) of finite \(p_0\) norm.

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Cited in

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