Distribution‐constrained optimal stopping
dc.contributor.author | Bayraktar, Erhan | |
dc.contributor.author | Miller, Christopher W. | |
dc.date.accessioned | 2019-01-15T20:24:37Z | |
dc.date.available | 2020-03-03T21:29:35Z | en |
dc.date.issued | 2019-01 | |
dc.identifier.citation | Bayraktar, Erhan; Miller, Christopher W. (2019). "Distribution‐constrained optimal stopping." Mathematical Finance 29(1): 368-406. | |
dc.identifier.issn | 0960-1627 | |
dc.identifier.issn | 1467-9965 | |
dc.identifier.uri | https://hdl.handle.net/2027.42/146860 | |
dc.description.abstract | We solve the problem of optimal stopping of a Brownian motion subject to the constraint that the stopping time’s distribution is a given measure consisting of finitely many atoms. In particular, we show that this problem can be converted to a finite sequence of state‐constrained optimal control problems with additional states corresponding to the conditional probability of stopping at each possible terminal time. The proof of this correspondence relies on a new variation of the dynamic programming principle for state‐constrained problems, which avoids measurable selections. We emphasize that distribution constraints lead to novel and interesting mathematical problems on their own, but also demonstrate an application in mathematical finance to model‐free superhedging with an outlook on volatility. | |
dc.publisher | Cambridge University Press | |
dc.publisher | Wiley Periodicals, Inc. | |
dc.subject.other | optimal control | |
dc.subject.other | robust hedging with a volatility outlook | |
dc.subject.other | state constraints | |
dc.subject.other | optimal stopping | |
dc.subject.other | distribution constraints | |
dc.title | Distribution‐constrained optimal stopping | |
dc.type | Article | en_US |
dc.rights.robots | IndexNoFollow | |
dc.subject.hlbsecondlevel | Mathematics | |
dc.subject.hlbsecondlevel | Finance | |
dc.subject.hlbtoplevel | Science | |
dc.subject.hlbtoplevel | Business and Economics | |
dc.description.peerreviewed | Peer Reviewed | |
dc.description.bitstreamurl | https://deepblue.lib.umich.edu/bitstream/2027.42/146860/1/mafi12171_am.pdf | |
dc.description.bitstreamurl | https://deepblue.lib.umich.edu/bitstream/2027.42/146860/2/mafi12171.pdf | |
dc.identifier.doi | 10.1111/mafi.12171 | |
dc.identifier.source | Mathematical Finance | |
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dc.owningcollname | Interdisciplinary and Peer-Reviewed |
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