The Optimal Stopping Problem of Dupuis and Wang: A Generalization
AbstractIn this paper, we study the optimal stopping problem of Dupuis and Wang analyzed in . In this problem, the underlying follows a linear diffusion but the decision maker is not allowed to stop at any time she desires but rather on the jump times of an independent Poisson process. In , the authors solve this problem in the case where the underlying is a geometric Brownian motion and the payoff function is of American call option type. In the current study, we will this problem under weak assumptions on both the underlying and the payoff. We also demonstrate that the results of  are recovered from ours.
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Bibliographic InfoPaper provided by Aboa Centre for Economics in its series Discussion Papers with number 36.
Date of creation: Sep 2008
Date of revision:
Optimal stopping; linear diffusion; free boundary problem; Poisson process;
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-17 (All new papers)
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- Dayanik, Savas & Karatzas, Ioannis, 2003. "On the optimal stopping problem for one-dimensional diffusions," Stochastic Processes and their Applications, Elsevier, vol. 107(2), pages 173-212, October.
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