Representation of non-Markovian optimal stopping problems by constrained BSDEs with a single jump

DOI10.1214/16-ECP4123zbMATH Open1338.60118arXiv1502.05422MaRDI QIDQ287772FDOQ287772

Authors: Marco Fuhrman, Huyên Pham, Federica Zeni 

Publication date: 23 May 2016

Published in: Electronic Communications in Probability (Search for Journal in Brave)

Abstract: We consider a non-Markovian optimal stopping problem on finite horizon. We prove that the value process can be represented by means of a backward stochastic differential equation (BSDE), defined on an enlarged probability space, containing a stochastic integral having a one-jump point process as integrator and an (unknown) process with a sign constraint as integrand. This provides an alternative representation with respect to the classical one given by a reflected BSDE. The connection between the two BSDEs is also clarified. Finally, we prove that the value of the optimal stopping problem is the same as the value of an auxiliary optimization problem where the intensity of the point process is controlled.

Full work available at URL: https://arxiv.org/abs/1502.05422

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zbMATH Keywords

backward stochastic differential equationsoptimal stoppingrandomized stopping

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Stopping times; optimal stopping problems; gambling theory (60G40)

Cited In (5)

• Backward SDEs and infinite horizon stochastic optimal control
• Optimal switching problems with an infinite set of modes: an approach by randomization and constrained backward SDEs
• Backward SDEs for optimal control of partially observed path-dependent stochastic systems: A control randomization approach
• Discrete-type approximations for non-Markovian optimal stopping problems: Part I
• Control randomisation approach for policy gradient and application to reinforcement learning in optimal switching

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