Dynamic programming for optimal stopping via pseudo-regression

Abstract

We introduce new variants of classical regression-based algorithms for optimal stopping problems based on computation of regression coefficients by Monte Carlo approximation of the corresponding L^2 inner products instead of the least-squares error functional. Coupled with new proposals for simulation of the underlying samples, we call the approach "pseudo regression". A detailed convergence analysis is provided and it is shown that the approach asymptotically leads to less computational cost for a pre-specified error tolerance, hence to lower complexity. The method is justified by numerical examples.

Tasks

Reproductions