Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/43762
Authors: 
Riedel, Frank
Year of Publication: 
2010
Series/Report no.: 
Working papers // Institute of Mathematical Economics 429
Abstract: 
We develop a theory of optimal stopping problems under ambiguity in continuous time. Using results from (backward) stochastic calculus, we characterize the value function as the smallest (nonlinear) supermartingale dominating the payoff process. For Markovian models, we derive an adjusted Hamilton-Jacobi-Bellman equation involving a nonlinear drift term that stems from the agent's ambiguity aversion. We show how to use these general results for search problems and American Options.
Subjects: 
Optimal stopping
Ambiguity
Uncertainty aversion
Robustness
Continuous time
Optimal control
JEL: 
D81
C61
G11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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