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Robust Multiple Stopping -- A Pathwise Duality Approach

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  • Roger J. A. Laeven
  • John G. M. Schoenmakers
  • Nikolaus F. F. Schweizer
  • Mitja Stadje

Abstract

We develop a method to solve, theoretically and numerically, general optimal stopping problems. Our general setting allows for multiple exercise rights, i.e., optimal multiple stopping, for a robust evaluation that accounts for model uncertainty, and for general reward processes driven by multi-dimensional jump-diffusions. Our approach relies on first establishing robust martingale dual representation results for the multiple stopping problem that satisfy appealing pathwise optimality (i.e., almost sure) properties. Next, we exploit these theoretical results to develop upper and lower bounds that, as we formally show, not only converge to the true solution asymptotically, but also constitute genuine pre-limiting upper and lower bounds. We illustrate the applicability of our approach in a few examples and analyze the impact of model uncertainty on optimal multiple stopping strategies.

Suggested Citation

  • Roger J. A. Laeven & John G. M. Schoenmakers & Nikolaus F. F. Schweizer & Mitja Stadje, 2020. "Robust Multiple Stopping -- A Pathwise Duality Approach," Papers 2006.01802, arXiv.org, revised Sep 2021.
  • Handle: RePEc:arx:papers:2006.01802
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