A Potential-theoretic Approach to Optimal Stopping in a Spectrally Lévy Model

Masahiko Egami and Tomohiro Koike

Discussion papers from Graduate School of Economics , Kyoto University

Abstract: We present a systematic solution method for optimal stopping problem of one-dimensional spectrally negative L´evy processes. Our main tools are based on the potential theory, particularly the Riesz decomposition and the maximum principle. This novel approach allows us to handle a broad class of reward functions. That is, we solve the problem in a general setup without relying on specific form of the reward function. We provide a step-by-step solution procedure, which is applicable to complex solution structures including multiple double-sided continuation regions.

Keywords: Optimal stopping; spectrally negative L´evy processes; potential theory; Riesz decomposition; maximum principle. (search for similar items in EconPapers)
Pages: 35
Date: 2025-07
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Persistent link: https://EconPapers.repec.org/RePEc:kue:epaper:e-25-007

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