Optimal double stopping time

Authors Magdalena Kobylanski, Marie-Claire Quenez, Elisabeth Rouy-Mironescu

Publication date 18 September 2009

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

Abstract: We consider the optimal double stopping time problem defined for each stopping time

S

by

v (S) = e s s s u p E [p s i (a u_{1}, a u_{2}) | F_{S}], a u_{1}, a u_{2} g e q S

. Following the optimal one stopping time problem, we study the existence of optimal stopping times and give a method to compute them. The key point is the construction of a {em new reward}

p h i

such that the value function

v (S)

satisfies

v (S) = e s s s u p E [p h i (a u) | F_{S}], a u g e q S

. Finally, we give an example of an american option with double exercise time.

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