Recombining Tree Approximations for Optimal Stopping for Diffusions
Probability
2017-12-13 v3
Abstract
In this paper we develop two numerical methods for optimal stopping in the framework of one dimensional diffusion. Both of the methods use the Skorohod embedding in order to construct recombining tree approximations for diffusions with general coefficients. This technique allows us to determine convergence rates and construct nearly optimal stopping times which are optimal at the same rate. Finally, we demonstrate the efficiency of our schemes on several models
Keywords
Cite
@article{arxiv.1610.00554,
title = {Recombining Tree Approximations for Optimal Stopping for Diffusions},
author = {Erhan Bayraktar and Yan Dolinsky and Jia Guo},
journal= {arXiv preprint arXiv:1610.00554},
year = {2017}
}
Comments
Final version. To appear in SIAM Journal on Financial Mathematics