Optimal Stopping with Expectation Constraints
Abstract
We analyze an optimal stopping problem with a series of inequality-type and equality-type expectation constraints in a general non-Markovian framework. We show that the optimal stopping problem with expectation constraints (OSEC) in an arbitrary probability setting is equivalent to the constrained problem in weak formulation (optimization over joint laws of stopping rules with Brownian motion and state dynamics on an enlarged canonical space) and thus the OSEC value. Using a martingale-problem formulation, we make an equivalent characterization of the probability classes in weak formulation, which implies that the OSEC value function s upper semi-analytic. Then we exploit a measurable selection argument to establish a dynamic programming principle in weak formulation for the OSEC value function, in which the conditional expected costs act as additional states for constraint levels at the intermediate horizon.
Cite
@article{arxiv.2011.04886,
title = {Optimal Stopping with Expectation Constraints},
author = {Erhan Bayraktar and Song Yao},
journal= {arXiv preprint arXiv:2011.04886},
year = {2023}
}
Comments
Results are significantly improved. Keywords: Optimal stopping with expectation constraints, % equivalence of different formulations, martingale-problem formulation, enlarged canonical space, Polish space of stopping times, dynamic programming principle, regular conditional probability distribution, measurable selection