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dc.contributor.authorRiedel, Franken_US
dc.date.accessioned2008-07-23en_US
dc.date.accessioned2011-01-24T10:24:02Z-
dc.date.available2011-01-24T10:24:02Z-
dc.date.issued2007en_US
dc.identifier.piurn:nbn:de:hbz:361-10784en_US
dc.identifier.urihttp://hdl.handle.net/10419/43837-
dc.description.abstractWe consider optimal stopping problems for ambiguity averse decision makers with multiple priors. In general, backward induction fails. If, however, the class of priors is time-consistent, we establish a generalization of the classical theory of optimal stopping. To this end, we develop first steps of a martingale theory for multiple priors. We define minimax (super)martingales, provide a Doob-Meyer decomposition, and characterize minimax martingales. This allows us to extend the standard backward induction procedure to ambiguous, time-consistent preferences. The value function is the smallest process that is a minimax supermartingale and dominates the payoff process. It is optimal to stop when the current payoff is equal to the value function. Moving on, we study the infinite horizon case. We show that the value process satisfies the same backward recursion (Bellman equation) as in the finite horizon case. The finite horizon solutions converge to the infinite horizon solution. Finally, we characterize completely the set of time-consistent multiple priors in the binomial tree. We solve two classes of examples: the so-called independent and indistinguishable case (the parking problem) and the case of American Options (Cox-Ross-Rubinstein model).en_US
dc.language.isoengen_US
dc.publisherInst. of Mathematical Economics, IMW Bielefelden_US
dc.relation.ispartofseriesWorking papers // Institute of Mathematical Economics 390en_US
dc.subject.jelD81en_US
dc.subject.jelC61en_US
dc.subject.jelG11en_US
dc.subject.ddc330en_US
dc.subject.keywordOptimal stoppingen_US
dc.subject.keywordAmbiguityen_US
dc.subject.keywordUncertainty aversionen_US
dc.subject.stwEntscheidung bei Unsicherheiten_US
dc.subject.stwSuchtheorieen_US
dc.subject.stwRisikoaversionen_US
dc.subject.stwOptionspreistheorieen_US
dc.subject.stwTheorieen_US
dc.titleOptimal stopping under ambiguityen_US
dc.typeWorking Paperen_US
dc.identifier.ppn572379609en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Working Papers, Center for Mathematical Economics (IMW), Bielefeld University

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