Optimal Stopping in Discrete Time

Tomas Bjork, Mariana Khapko () and Agatha Murgoci ()
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Mariana Khapko: University of Toronto
Agatha Murgoci: Ørsted

Chapter Chapter 21 in Time-Inconsistent Control Theory with Finance Applications, 2021, pp 219-226 from Springer

Abstract: Abstract Optimal stopping theory studies problems that involve determining the best time to intervene and stop a process in order to maximize expected rewards or minimize expected costs. Applications of optimal stopping theory are plentiful and include asset trading (e.g., the best time to sell an asset), derivative pricing (e.g., American options), real options theory (e.g., the best time to invest in a project), economics of gambling (e.g., when to stop gambling in a casino), and search and matching (e.g., when to stop searching and accept a job). In this chapter we briefly summarize standard optimal stopping theory in discrete time.

Date: 2021
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DOI: 10.1007/978-3-030-81843-2_21

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