A new integral equation for Brownian stopping problems with finite time horizon (Q6115254)

The subject of the paper is the classical finite time horizon stopping problems driven by a Brownian motion: \[ V(t, x) = \sup_{t\leq\tau\leq 0}{\mathbf E}_{(t,x)}[g(\tau,W_\tau )], \] where \(W\) is an n-dimensional standard Brownian motion started at time \(t\leq 0\) in \(x\in\mathbb{R}^n\) and \(g: \mathbb{R}_{\leq 0} \times\mathbb{R}^n\rightarrow\mathbb{R}\) a payoff function [\textit{T. L. Lai} and \textit{T. W. Lim}, J. Stat. Plann. Inference 130, No. 1--2, 21--47 (2005; Zbl 1085.62096); \textit{G. Peskir} and \textit{A. Shiryaev}, Optimal stopping and free-boundary problems. Basel: Birkhäuser (2006; Zbl 1115.60001)]. A new class of Fredholm-type integral equations for the stopping set is derived. For a large class of discounted problems, analytical arguments show that the equation uniquely characterizes the stopping boundary of the problem. Regardless of the uniqueness, the representation is used to rigorously find the limit behavior of the stopping boundary close to the terminal time. It turns out that the leading-order coefficient is universal for a wide range of problems. This discussion shows that the representation can be used for numerical purposes. The authors are confident that uniqueness holds in a more general setting as well, but this still has to be proven.