Stopping of functionals with discontinuity at the boundary of an open set

Jan Palczewski and Lukasz Stettner

Stochastic Processes and their Applications, 2011, vol. 121, issue 10, 2361-2392

Abstract: We explore properties of the value function and existence of optimal stopping times for functionals with discontinuities related to the boundary of an open (possibly unbounded) set . The stopping horizon is either random, equal to the first exit from the set , or fixed (finite or infinite). The payoff function is continuous with a possible jump at the boundary of . Using a generalization of the penalty method, we derive a numerical algorithm for approximation of the value function for general Feller-Markov processes and show existence of optimal or [epsilon]-optimal stopping times.

Keywords: Optimal; stopping; Feller-Markov; process; Discontinuous; functional; Penalty; method (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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