Neural Optimal Stopping Boundary

02/02/2023 12:30 pm - 1:30 pm
Changji Xu Shai Chester Shuaijie Qian Uri Kol
CMSA Room G10
Address: CMSA, 20 Garden Street, Cambridge, MA 02138 USA

Speaker: Max Reppen (Boston University)

Title: Neural Optimal Stopping Boundary

Abstract:  A 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.