Dynamic optimality in optimal variance stopping problems

Publication date: October 2018Source: Statistics & Probability Letters, Volume 141Author(s): B. BuonaguidiAbstractIn an optimal variance stopping (O.V.S.) problem one seeks to determine the stopping time that maximizes the variance of an observed process. As originally shown by Pedersen (2011), the variance criterion leads to optimal stopping boundaries that depend explicitly on the initial point of the process. Then, following the lines of Pedersen and Peskir (2016), we introduce the concept of dynamic optimality for an O.V.S. problem, a type of optimality that disregards the starting point of the process. We examine when an O.V.S. problem admits a dynamically optimal stopping time and we illustrate our findings through several examples.

Source: Statistics and Probability Letters - July 10, 2018 Category: Statistics Source Type: research