Robust Multiple Stopping -A Duality Approach

We develop a method to solve, theoretically and numerically, 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 with a dominated family of priors, 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 that satisfy appealing almost sure pathwise optimality properties. Next, we exploit these theoretical results to develop upper and lower bounds that, as we formally show, not only converge to the true solution asymptotically, but also constitute genuine pre-limiting upper and lower bounds. We illustrate the applicability of our approach in a few examples and analyze the impact of model uncertainty on optimal multiple stopping strategies.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.


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