Solving Finite Time Horizon Dynkin Games by Optimal Switching

Randall Errol Martyr

Research output: Book/ReportCommissioned report

Abstract

This paper studies the connection between Dynkin games and optimal switching in continuous time and on a finite horizon. An auxiliary two-mode optimal switching problem is formulated which enables the derivation of the game's value under very mild assumptions. Under slightly stronger assumptions, the optimal switching formulation is used to prove the existence of a saddle point and a connection is made to the classical ``Mokobodski's hypothesis''. Results are illustrated by comparison to numerical solutions of three specific Dynkin games which have appeared in recent papers, including an example of a game option with payoff dependent on a jump-diffusion process.
Original languageEnglish
PublisherCambridge University Press
Number of pages29
Publication statusPublished - Nov 2014

Publication series

NameProbability and Statistics Research Reports

Keywords

  • optimal switching, stopping times, optimal stopping problems, Snell envelope

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