A Class of Solvable Stopping Games

A Class of Solvable Stopping Games We consider a class of Dynkin games in the case where the underlying process evolves according to a one-dimensional but otherwise general diffusion. We establish general conditions under which both the value and the saddle point equilibrium exist and under which the exercise boundaries characterizing the saddle point strategy can be explicitly characterized in terms of a pair of standard first order necessary conditions for optimality. We also analyze those cases where an extremal pair of boundaries exists and investigate the overall impact of increased volatility on the equilibrium stopping strategies and their values. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Applied Mathematics and Optimization Springer Journals

A Class of Solvable Stopping Games

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Publisher
Springer-Verlag
Copyright
Copyright © 2008 by Springer Science+Business Media, LLC
Subject
Mathematics; Numerical and Computational Methods ; Mathematical Methods in Physics; Mathematical and Computational Physics; Systems Theory, Control; Calculus of Variations and Optimal Control; Optimization
ISSN
0095-4616
eISSN
1432-0606
D.O.I.
10.1007/s00245-008-9035-z
Publisher site
See Article on Publisher Site

Abstract

We consider a class of Dynkin games in the case where the underlying process evolves according to a one-dimensional but otherwise general diffusion. We establish general conditions under which both the value and the saddle point equilibrium exist and under which the exercise boundaries characterizing the saddle point strategy can be explicitly characterized in terms of a pair of standard first order necessary conditions for optimality. We also analyze those cases where an extremal pair of boundaries exists and investigate the overall impact of increased volatility on the equilibrium stopping strategies and their values.

Journal

Applied Mathematics and OptimizationSpringer Journals

Published: Dec 1, 2008

References

  • A class of solvable impulse control problems
    Alvarez, L.H.R.

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