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Regularity of the optimal stopping problem for jump diffusions

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The value function of an optimal stopping problem for jump diffusions is known to be a generalized solution of a variational inequality. Assuming that the diffusion component of the process is nondegenerate and a mild assumption on the singularity of the L´evy measure, this paper shows that the value function of this optimal stopping problem on an unbounded domain with finite/infinite variation jumps is in W2;1 p;loc with p 2 (1;1). As a consequence, the smooth-fit property holds.

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en

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http://eprints.lse.ac.uk/43458/

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