Robust multiple stopping -- A path-wise duality approach
- Laeven, Roger J. A.
- Schoenmakers, John G. M.
- Schweizer, Nikolaus F. F.
- Stadje, Mitja
2010 Mathematics Subject Classification
- 49L20 60G40 91B16
- Optimal stopping, multiple stopping, robustness, model uncertainty, ambiguity, path-wise duality, g-expectations, BSDEs, regression
In this paper we develop a solution method for general optimal stopping problems. Our general setting allows for multiple exercise rights, i.e., optimal multiple stopping, for a robust evaluation that accounts for model uncertainty, and for general reward processes driven by multi-dimensional jump-diffusions. Our approach relies on first establishing robust martingale dual representation results for the multiple stopping problem which satisfy appealing path-wise optimality (almost sure) properties. Next, we exploit these theoretical results to develop upper and lower bounds which, as we formally show, not only converge to the true solution asymptotically, but also constitute genuine upper and lower bounds. We illustrate the applicability of our general approach in a few examples and analyze the impact of model uncertainty on optimal multiple stopping strategies.