Economics at your fingertips  

A Solvable Two-dimensional Optimal Stopping Problem in the Presence of Ambiguity

S\"oren Christensen and Luis H. R. Alvarez E

Papers from

Abstract: According to conventional wisdom, ambiguity accelerates optimal timing by decreasing the value of waiting in comparison with the unambiguous benchmark case. We study this mechanism in a multidimensional setting and show that in a multifactor model ambiguity does not only influence the rate at which the underlying processes are expected to grow, it also affects the rate at which the problem is discounted. This mechanism where nature also selects the rate at which the problem is discounted cannot appear in a one-dimensional setting and as such we identify an indirect way of how ambiguity affects optimal timing.

New Economics Papers: this item is included in nep-bec
Date: 2019-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Papers from
Bibliographic data for series maintained by arXiv administrators ().

Page updated 2019-07-27
Handle: RePEc:arx:papers:1905.05429