We revisit the forward algorithm, developed by Irle, to characterize both the value function and the stopping set for a large class of optimal stopping problems on continuous-time Markov chains. Our objective is to renew interest in this constructive method by showing its usefulness in solving some constrained optimal stopping problems that have emerged recently.
Markov chains; Optimal Stopping; American option pricing;
Laurent Miclo, and Stéphane Villeneuve, “On the forward algorithm for stopping problems on continuous-time Markov chains”, Journal of Applied Probability, vol. 58, n. 4, 2021, pp. 1043–1063.
Journal of Applied Probability, vol. 58, n. 4, 2021, pp. 1043–1063