Optimal Stopping with Dynamic Variational Preferences
AbstractWe consider optimal stopping problems in uncertain environments for an agent assessing utility by virtue of dynamic variational preferences or, equivalently, assessing risk by dynamic convex risk measures. The solution is achieved by generalizing the approach in terms of multiple priors introducing the concept of variational supermartingales and an accompanying theory. To illustrate results, we consider prominent examples: dynamic entropic risk measures and a dynamic version of generalized average value at risk.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse20_2009.
Date of creation: Aug 2009
Date of revision:
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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
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Web page: http://www.bgse.uni-bonn.de
optimal Stopping; Uncertainty; Dynamic Variational Preferences; Dynamic Convex Risk Measures; Dynamic Penalty; Time-Consistency; Entropic Risk; Average Value at Risk;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-30 (All new papers)
- NEP-COM-2009-08-30 (Industrial Competition)
- NEP-CTA-2009-08-30 (Contract Theory & Applications)
- NEP-IND-2009-08-30 (Industrial Organization)
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