Optimal decision under ambiguity for diffusion processes

Details Optimal decision under ambiguity for diffusion processes Optimal decision under ambiguity for diffusion processes

2011-10-18

arxiv.org/abs/1110.3897v1

Economy

Quantitative Finance

Computational Finance

Scientific paper

In this paper we consider stochastic optimization problems for a risk-avers investor when the decision maker is uncertain about the parameters of the underlying process. In a first part we consider problems of optimal stopping under drift ambiguity for one-dimensional diffusion processes. Analogously to the case of ordinary optimal stopping problems for one-dimensional Brow- nian motions we reduce the problem to the geometric problem of finding the smallest majorant of the reward function in an two-parameter function space. In a second part we solve optimal stopping problems when the underlying process can crash down. These problems are reduced to one optimal stopping problem and one Dynkin game. An explicit example is discussed.

Affiliated with

Also associated with

No associations

Rating

Optimal decision under ambiguity for diffusion processes does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Optimal decision under ambiguity for diffusion processes, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Optimal decision under ambiguity for diffusion processes will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-290484