The shape of the value function under Poisson optimal stopping

DOI10.1016/J.SPA.2020.12.001MaRDI QIDQ1994915zbMATH OpenOpenAlexFDO

Authors David Hobson

Publication date 18 February 2021

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

Full work available at URL https://arxiv.org/abs/2003.03834

zbMATH Keywords

couplingdiffusion processmonotonicity and convexityPoisson optimal stoppingtime-change

Mathematics Subject Classification ID

Probability measures on topological spaces (60B05) Stopping times; optimal stopping problems; gambling theory (60G40) Diffusion processes (60J60)

Abstract: In a classical problem for the stopping of a diffusion process $(X_t{)}_{tgeq0}$, where the goal is to maximise the expected discounted value of a function of the stopped process $$, maximisation takes place over all stopping times $au$. In a Poisson optimal stopping problem, stopping is restricted to event times of an independent Poisson process. In this article we consider whether the resulting value function $$ (where the supremum is taken over stopping times taking values in the event times of an inhomogeneous Poisson process with rate $heta=(heta(X_t){)}_{tgeq0}$) inherits monotonicity and convexity properties from $g$. It turns out that monotonicity (respectively convexity) of $V_{h}eta$ in $x$ depends on the monotonicity (respectively convexity) of the quantity $$ rather than $g$. Our main technique is stochastic coupling.

Review text

The author studies a Poisson optimal stopping of a diffusion process, i.e., the maximization takes place over all event times of an independent, inhomogeneous Poisson process with rate \(\theta=\theta(X_t)\), \(t\geq 0\). The aim is to check if the value function \(V_\theta(x)=\sup_{\tau\in \mathcal T}\textbf{E}_x[e^{-\beta\tau}g(X_\tau)]\), where \(\mathcal{T}\) is the set of all stopping times taking values at an event time of prescribed Poisson process, inherits monotonicity and convexity properties from \(g\). It is shown that monotonicity (respectively convexity) of \(V_\theta(x)\) in \(x\) depends on the monotonicity (respectively convexity) of the quantity \(\frac{\theta(x)g(x)}{\theta(x)+\beta}\) rather than g. The proof uses stochastic coupling technique. It is worth noting that a closely related formulation of the optimal stopping task considered in this paper is the Eflving's problem (see [\textit{G. Elfving}, J. Appl. Probab. 4, 77--89 (1967; Zbl 0183.20705); \textit{D. O. Siegmund}, Ann. Math. Stat. 38, 1627--1640 (1967; Zbl 0183.20706); \textit{R. Righter}, Probab. Eng. Inf. Sci. 1, 189--202 (1987; Zbl 1133.90415)]).

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Cited in

(10)

• Monotonicity of the value function for a two-dimensional optimal stopping problem
• A zero-sum Poisson stopping game with asymmetric signal rates
• Solutions for Poissonian stopping problems of linear diffusions via extremal processes
• On the monotonicity of the stopping boundary for time-inhomogeneous optimal stopping problems
• Constrained optimal stopping under a regime-switching model
• Two-sided Poisson control of linear diffusions
• Callable convertible bonds under liquidity constraints and hybrid priorities
• Recursive optimal stopping with Poisson stopping constraints
• Discounted nonzero-sum optimal stopping games under Poisson random intervention times
• Zero-sum Dynkin games under common and independent Poisson constraints

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