Optimal stopping under model uncertainty: randomized stopping times approach

DOI10.1214/15-AAP1116zbMATH Open1339.60043arXiv1405.2240MaRDI QIDQ292928FDOQ292928

Authors: D. Belomestny, Volker Krätschmer 

Publication date: 9 June 2016

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Abstract: In this work we consider optimal stopping problems with conditional convex risk measures called optimised certainty equivalents. Without assuming any kind of time-consistency for the underlying family of risk measures, we derive a novel representation for the solution of the optimal stopping problem. In particular, we generalise the additive dual representation of Rogers (2002) to the case of optimal stopping under uncertainty. Finally, we develop several Monte Carlo algorithms and illustrate their power for optimal stopping under Average Value at Risk.

Full work available at URL: https://arxiv.org/abs/1405.2240

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zbMATH Keywords

dynamic programmingmodel uncertaintyoptimal stoppingadditive dual representationconditional convex risk measuresMonte Carlo algorithmsoptimized certainty equivalentsprimal representationrandomized stopping timesthin sets

Mathematics Subject Classification ID

Monte Carlo methods (65C05) Numerical methods (including Monte Carlo methods) (91G60) Dynamic programming in optimal control and differential games (49L20) Stopping times; optimal stopping problems; gambling theory (60G40) Financial applications of other theories (91G80)

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Cited In (15)

• On the controller-stopper problems with controlled jumps
• Optimal stopping: Bermudan strategies meet non-linear evaluations
• Optimal stopping under model ambiguity: A time‐consistent equilibrium approach
• First order asymptotics of the sample average approximation method to solve risk averse stochastic programs
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• Risk-Averse Stochastic Programming: Time Consistency and Optimal Stopping
• Optimal stopping under uncertainty in drift and jump intensity
• Minimax theorems for American options without time-consistency
• Two explicit Skorokhod embeddings for simple symmetric random walk

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