Paavo Salminen
Optimal Stopping of Diffusions with Exceptional Points
Optimal Stopping of Diffusions with Exceptional Points
In this talk we discuss anomalies appearing in the solutions of optimal stopping problems when the underlying is a diffusion with skew points, sticky points or discontinuities in drift and/or diffusion coefficients. In particular, it is seen that even for linear payoff functions the continuation set can be disconnected and the smooth fit principle may fail. This is joint work based on different papers written with Luis Alvarez, Ernesto Mordecki and Bao Ta.