Physical Sciences and Mathematics Commons^™

Analysis Of The Continuity Of The Value Function Of An Optimal Stopping Problem, Samuel Morris Nehls

Theses and Dissertations

In order to study model uncertainty of an optimal stopping problem of a stochastic process with a given state dependent drift rate and volatility, we analyze the effects of perturbing the parameters of the problem. This is accomplished by translating the original problem into a semi-infinite linear program and its dual. We then approximate this dual linear program by a countably constrained sub-linear program as well as an infinite sequence of finitely constrained linear programs. We find that in this framework the value function will be lower semi-continuous with respect to the parameters. If in addition we restrict ourselves to …