English (United Kingdom)

https://curated-unify.zendy.io/wp-json/zendy-region/v1/featured_content/oa?rat=en

https://curated-unify.zendy.io/wp-json/zendy-region/v1/highlighted_journal/

Global: Zendy Tools annual

Presents the keyphrase highlighting as premium feature

Keyphrase Highlighting

Presents the summarisation as premium feature

Summarisation

Insights

Presents the pdf analysis as premium feature

PDF Analysis

Presents the zaia usage as premium feature

ZAIA

Global: Zendy Tools monthly

Global: Zendy Plus monthly

Presents the access of premium content as premium feature

Premium Content

Global: Zendy Plus annual

Global: Zendy Free Plan

We consider the problem of optimally stopping a general one-dimensional stochastic differential equation (SDE) with generalised drift over an infinite time horizon. First, we derive a complete characterisation of the solution to this problem in terms of variational inequalities. In particular, we prove that the problem's value function is the difference of two convex functions and satisfies an appropriate variational inequality in the sense of distributions. We also establish a verification theorem that is the strongest one possible because it involves only the optimal stopping problem's data. Next, we derive the complete explicit solution to the problem that arises when the state process is a skew geometric Brownian motion and the reward function is the one of a financial call option. In this case, we show that the optimal stopping strategy can take several qualitatively different forms, depending on parameter values. Furthermore, the explicit solution to this special case reveals that the so-called "principle of smooth fit" does not hold in general for this type of optimal stopping problems in standard senses that this can be formulated.

Discretionary stopping of stochastic differential equations with generalised drift