Regularity of the optimal stopping problem for jump diffusions

DOI10.1137/100810915MaRDI QIDQ2910907zbMATH OpenOpenAlexFDO

Authors Erhan Bayraktar, Hao Xing

Publication date 12 September 2012

Published in SIAM Journal on Control and Optimization (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0902.2479

zbMATH Keywords

optimal stoppingSobolev spacesvariational inequalitysmooth-fit principleregularity of the value functionLévy process

Mathematics Subject Classification ID

Integro-partial differential equations (45K05) Free boundary problems for PDEs (35R35) Stopping times; optimal stopping problems; gambling theory (60G40)

Abstract: The value function of an optimal stopping problem for jump diffusions is known to be a generalized solution of a variational inequality. Assuming that the diffusion component of the process is nondegenerate and a mild assumption on the singularity of the L'{e}vy measure, this paper shows that the value function of this optimal stopping problem on an unbounded domain with finite/infinite variation jumps is in $W_{p,loc}^{2,1}$ with $pin(1,infty)$. As a consequence, the smooth-fit property holds.

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(14)

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