An optimal stopping problem for fragmentation processes

DOI10.1016/J.SPA.2011.12.009MaRDI QIDQ424467zbMATH OpenOpenAlexFDO

Authors A. E. Kyprianou, J. C. Pardo

Publication date 1 June 2012

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

Full work available at URL https://arxiv.org/abs/1101.5035

zbMATH Keywords

fragmentation processesgeneralized Ornsteinintegrated exponential Lévy processUhlenbeck processes

Mathematics Subject Classification ID

Stopping times; optimal stopping problems; gambling theory (60G40) Processes with independent increments; Lévy processes (60G51) Continuous-time Markov processes on general state spaces (60J25) Optimal stochastic control (93E20)

Abstract: In this article we consider a toy example of an optimal stopping problem driven by fragmentation processes. We show that one can work with the concept of stopping lines to formulate the notion of an optimal stopping problem and moreover, to reduce it to a classical optimal stopping problem for a generalized Ornstein-Uhlenbeck process associated with Bertoin's tagged fragment. We go on to solve the latter using a classical verification technique thanks to the application of aspects of the modern theory of integrated exponential Levy processes.

Review text

This paper addresses the previously never treated issue of how a homogeneous fragmentation process (for these, see, e.g., the book by \textit{J. Bertoin} [Random fragmentation and coagulation processes. Cambridge: Cambridge University Press (2006; Zbl 1107.60002)]) may be used to drive optimal stopping problems. In Section 3, the authors give (and interpret) a toy optimal stopping problem for a certain homogeneous fragmentation process. In Section 2, the definition of a stopping line (which was introduced in the book by Bertoin [loc. cit.]) is given and the ``many-to-one principle is formulated which basically goes back to \textit{J. Berestycki}, \textit{S. C. Harris} and \textit{A. E. Kyprianou} [Ann. Appl. Probab. 21, No. 5, 1749--1794 (2011; Zbl 1245.60069)]. It is then shown how the theory of stopping lines allows the above optimal stopping problem to be converted to a classical optimal stopping problem for a generalized Ornstein-Uhlenbeck process associated with Bertoin's tagged fragment. The latter is then solved by using a classical verification technique thanks to the application of certain aspects of the modern theory of integrated exponential Lévy processes.

Recommendations

• Optimal stopping problems for some Markov processes
• Optimal Stopping for Processes with Independent Increments, and Applications
• Homogeneous fragmentation processes
• Optimal stopping of strong Markov processes
• Optimal stopping of Hunt and Lévy processes

Cites work

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Cited in

(1)

• Discrete model for fragmentation with random stopping

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