Optimal stopping with random maturity under nonlinear expectations

DOI10.1016/J.SPA.2016.12.001MaRDI QIDQ2360243zbMATH OpenOpenAlexFDO

Authors Erhan Bayraktar, Song Yao

Publication date 30 June 2017

Published in Stochastic Processes and their Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1505.07533

zbMATH Keywords

controls in weak formulationdiscretionary stoppingdynamic programming principleLipschitz continuous stopping timemartingale approachnonlinear expectationoptimal stoppingrandom maturityweak stability under pasting

Mathematics Subject Classification ID

Stopping times; optimal stopping problems; gambling theory (60G40) Applications of stochastic analysis (to PDEs, etc.) (60H30)

Abstract: We analyze an optimal stopping problem with random maturity under a nonlinear expectation with respect to a weakly compact set of mutually singular probabilities $mathcalP$. The maturity is specified as the hitting time to level $0$ of some continuous index process at which the payoff process is even allowed to have a positive jump. When $mathcalP$ is a collection of semimartingale measures, the optimal stopping problem can be viewed as a {it discretionary} stopping problem for a player who can influence both drift and volatility of the dynamic of underlying stochastic flow.

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