Skip to main content
×
×
Home

On the Continuous and Smooth Fit Principle for Optimal Stopping Problems in Spectrally Negative Lévy Models

  • Masahiko Egami (a1) and Kazutoshi Yamazaki (a2)
Abstract

We consider a class of infinite time horizon optimal stopping problems for spectrally negative Lévy processes. Focusing on strategies of threshold type, we write explicit expressions for the corresponding expected payoff via the scale function, and further pursue optimal candidate threshold levels. We obtain and show the equivalence of the continuous/smooth fit condition and the first-order condition for maximization over threshold levels. As examples of its applications, we give a short proof of the McKean optimal stopping problem (perpetual American put option) and solve an extension to Egami and Yamazaki (2013).

Copyright
Corresponding author
Postal address: Graduate School of Economics, Kyoto University, Sakyo-Ku, Kyoto, 606-8501, Japan. Email address: egami@econ.kyoto-u.ac.jp
∗∗ Postal address: Department of Mathematics, Faculty of Engineering Science, Kansai University, Suita-shi, Osaka, 564-8680, Japan. Email address: kyamazak@kansai-u.ac.jp
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Advances in Applied Probability
  • ISSN: 0001-8678
  • EISSN: 1475-6064
  • URL: /core/journals/advances-in-applied-probability
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords

MSC classification

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 27 *
Loading metrics...

Abstract views

Total abstract views: 168 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 22nd July 2018. This data will be updated every 24 hours.