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A Potential-theoretic Approach to Optimal Stopping in a Spectrally Lévy Model

Author

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  • Masahiko EGAMI
  • Tomohiro KOIKE

Abstract

We present a systematic solution method for optimal stopping problem of one-dimensional spectrally negative L´evy processes. Our main tools are based on the potential theory, particularly the Riesz decomposition and the maximum principle. This novel approach allows us to handle a broad class of reward functions. That is, we solve the problem in a general setup without relying on specific form of the reward function. We provide a step-by-step solution procedure, which is applicable to complex solution structures including multiple double-sided continuation regions.

Suggested Citation

  • Masahiko EGAMI & Tomohiro KOIKE, 2025. "A Potential-theoretic Approach to Optimal Stopping in a Spectrally Lévy Model," Discussion papers e-25-007, Graduate School of Economics , Kyoto University.
    • Handle: RePEc:kue:epaper:e-25-007
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