
arXiv: 2205.04595
AbstractA method based on deep artificial neural networks and empirical risk minimization is developed to calculate the boundary separating the stopping and continuation regions in optimal stopping. The algorithm parameterizes the stopping boundary as the graph of a function and introduces relaxed stopping rules based on fuzzy boundaries to facilitate efficient optimization. Several financial instruments, some in high dimensions, are analyzed through this method, demonstrating its effectiveness. The existence of the stopping boundary is also proved under natural structural assumptions.
Stopping times; optimal stopping problems; gambling theory, 91G20, 91G60, 68T07, 35R35 91G60, 68T07, 35R35, Probability (math.PR), deep learning, fuzzy boundary, FOS: Economics and business, Derivative securities (option pricing, hedging, etc.), optimal stopping, FOS: Mathematics, Pricing of Securities (q-fin.PR), Bermudan options, American derivatives, Quantitative Finance - Pricing of Securities, Mathematics - Probability, Artificial neural networks and deep learning, stopping boundary problems
Stopping times; optimal stopping problems; gambling theory, 91G20, 91G60, 68T07, 35R35 91G60, 68T07, 35R35, Probability (math.PR), deep learning, fuzzy boundary, FOS: Economics and business, Derivative securities (option pricing, hedging, etc.), optimal stopping, FOS: Mathematics, Pricing of Securities (q-fin.PR), Bermudan options, American derivatives, Quantitative Finance - Pricing of Securities, Mathematics - Probability, Artificial neural networks and deep learning, stopping boundary problems
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