Optimal decision under ambiguity for diffusion processes

DOI10.1007/S00186-012-0425-2MaRDI QIDQ2392786zbMATHOpenAlexFDO

Authors Sören Christensen

Publication date 2 August 2013

Published in Mathematical Methods of Operations Research (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1110.3897

zbMATH Keywords

optimal stoppingambiguity aversiondiffusion processesDynkin gamescrash-scenario

Mathematics Subject Classification ID

Diffusion processes (60J60) Stopping times; optimal stopping problems; gambling theory (60G40)

Abstract: In this paper we consider stochastic optimization problems for an ambiguity averse decision maker who is uncertain about the parameters of the underlying process. In a first part we consider problems of optimal stopping under drift ambiguity for one-dimensional diffusion processes. Analogously to the case of ordinary optimal stopping problems for one-dimensional Brownian motions we reduce the problem to the geometric problem of finding the smallest majorant of the reward function in a two-parameter function space. In a second part we solve optimal stopping problems when the underlying process may crash down. These problems are reduced to one optimal stopping problem and one Dynkin game. Examples are discussed.

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Cited in

(8)

• The optimal decision rule in the Kiefer-Weiss problem for a Brownian motion
• A class of solvable multidimensional stopping problems in the presence of Knightian uncertainty
• Multidimensional investment problem
• Solutions for Poissonian stopping problems of linear diffusions via extremal processes
• A Knightian irreversible investment problem
• Nonparametric learning for impulse control problems -- exploration vs. exploitation
• Optimal stopping under uncertainty in drift and jump intensity
• Optimal stopping under ambiguity in continuous time

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