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Dynkin games with Poisson random intervention times

Gechun Liang and Haodong Sun

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Abstract: This paper introduces a new class of Dynkin games, where the two players are allowed to make their stopping decisions at a sequence of exogenous Poisson arrival times. The value function and the associated optimal stopping strategy are characterized by the solution of a backward stochastic differential equation. The paper further applies the model to study the optimal conversion and calling strategies of convertible bonds, and their asymptotics when the Poisson intensity goes to infinity.

New Economics Papers: this item is included in nep-gth, nep-hpe and nep-mic
Date: 2018-03, Revised 2019-07
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