Optimal prediction of the last-passage time of a transient diffusion

DOI10.1137/130950719zbMATH Open1312.60045arXiv1312.7342OpenAlexW2911512264MaRDI QIDQ5244641FDOQ5244641

Authors: Kristoffer J. Glover, Hardy Hulley 

Publication date: 27 March 2015

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

Abstract: We identify the integrable stopping time $a{u}_{\ast }$ with minimal $L^1$-distance to the last-passage time $gamm{a}_z$ to a given level $z>0$, for an arbitrary non-negative time-homogeneous transient diffusion $X$. We demonstrate that $a{u}_{\ast }$ is in fact the first time that $X$ assumes a value outside a half-open interval $[0,r_{\ast })$. The upper boundary $r_{\ast }>z$ of this interval is characterised either as the solution for a one-dimensional optimisation problem, or as part of the solution for a free-boundary problem. A number of concrete examples illustrate the result.

Full work available at URL: https://arxiv.org/abs/1312.7342

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zbMATH Keywords

optimal stoppingoptimal predictionfree-boundary problemslast-passage timestransient diffusions

Mathematics Subject Classification ID

Diffusion processes (60J60) Brownian motion (60J65) Nonlinear ordinary differential equations and systems (34A34) Free boundary problems for PDEs (35R35) Variational inequalities (49J40) Stopping times; optimal stopping problems; gambling theory (60G40) Martingales with continuous parameter (60G44)

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• Predicting the last zero before an exponential time of a spectrally negative Lévy process
• \(L^p\) optimal prediction of the last zero of a spectrally negative Lévy process

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