Monotonicity of the value function for a two-dimensional optimal stopping problem (Q2511558)

In the paper, the monotonicity and continuity of the value function \[ v(x,y)=\sup_\tau \mathbf{E}_{x,y}[\exp(-q\tau)g(X_\tau)] \] in \(y\), where \((X,Y)\) is the two dimensional process satisfying the equation \(dX=a(X)YdB\) driven by a Brownian motion, are investigated. The supremum is taken over stopping times with respect to the filtration generated by \((X,Y)\). The examples are applications of the result to pricing American options where \(X\) is the discounted price of an asset while \(Y\) is given by a stochastic volatility model (cf. [\textit{S. L. Heston}, ``A closed-form solution for options with stochastic volatility with applications to bond and currency options'', J. Finance 6, 326--343 (1993)] and [{S. L. Heston}, in: Stochastic volatility. Selected readings. Oxford: Oxford University Press. 382--397 (2005; Zbl 1126.91368)] or [\textit{J. Hull} and \textit{A. White}, ``The pricing of options on assets with stochastic volatilities'', J. Finance 42, 281--300 (1987)]). The main method of proof is based on time-change and coupling.