On a Solution of the Optimal Stopping Problem for Processes with Independent Increments
We discuss a solution of the optimal stopping problem for the case when a reward function is a power function of a process with independent stationary increments (random walks or Levy processes) on an infinite time interval. It is shown that an optimal stopping time is the first crossing time through a level defined as the largest root of the Appell function associated with the maximum of the underlying process.
|Date of creation:||01 Jun 2006|
|Date of revision:|
|Publication status:||Published as: Novikov, A. and Shiryaev, A, 2007, "On a Solution of the Optimal Stopping Problem for Processes with Independent Increments", Stochastics An International Journal of Probability and Stochastic Processes, 79(3-4), 393-406.|
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- Ernesto Mordecki, 2002. "Optimal stopping and perpetual options for Lévy processes," Finance and Stochastics, Springer, vol. 6(4), pages 473-493.
- Alexander Novikov & Albert Shiryaev, 2004. "On an Effective Solution of the Optimal Stopping Problem for Random Walks," Research Paper Series 131, Quantitative Finance Research Centre, University of Technology, Sydney.
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