Time-Consistent Stopping Under Decreasing Impatience

Time-consistent stopping under decreasing impatience

Time Consistent Risk Measure Under Stopping Time Framework and its Applications∗

For financial investment with a pre-specified investment target, the risk can be regarded as the uncertainty of the earliest target reaching time. As a refinement of this new perspective of risk measure, we introduce a new risk measure which is the extra time cost between the current time and the earliest time that the investment achieves the target or beats the benchmark at some confidence lev...

Constructing Time-Homogeneous Generalised Diffusions Consistent with Optimal Stopping Values

Consider a set of discounted optimal stopping problems for a one-parameter family of objective functions and a fixed diffusion process, started at a fixed point. A standard problem in stochastic control/optimal stopping is to solve for the problem value in this setting. In this article we consider an inverse problem; given the set of problem values for a family of objective functions, we aim to...

Optimal Stopping Under Ambiguity In Continuous Time

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 ave...

Decreasing impatience and the magnitude effect jointly contradict exponential discounting

The experimental literature on time preference …nds that the manner in which subjects discount money (as opposed to utility) exhibits properties known as Decreasing Impatience and the Magnitude Effect. While these …ndings are often referred to as anomalies for the Exponential Discounting model, several authors have demonstrated that each of these qualitative …ndings can be explained by the curv...