On Structural Properties of Risk-Averse Optimal Stopping Problems Article Swipe

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Steven I. Marcus ·

YOU? · · 2025 · Open Access · · DOI: https://doi.org/10.48550/arxiv.2511.01022

We establish structural properties of optimal stopping problems under time-consistent dynamic (coherent) risk measures, focusing on value function monotonicity and the existence of control limit (threshold) optimal policies. While such results are well developed for risk-neutral (expected-value) models, they remain underexplored in risk-averse settings. Coherent risk measures typically lack the tower property and are subadditive rather than additive, complicating structural analysis. We show that value function monotonicity mirrors the risk-neutral case. Moreover, if the risk envelope associated with each coherent risk measure admits a minimal element, the risk-averse optimal stopping problem reduces to an equivalent risk-neutral formulation. We also develop a general procedure for identifying control limit optimal policies and use it to derive practical, verifiable conditions on the risk measures and MDP structure that guarantee their existence. We illustrate the theory and verify these conditions through optimal stopping problems arising in operations, marketing, and finance.

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Type: preprint
Landing Page: http://arxiv.org/abs/2511.01022
PDF: https://arxiv.org/pdf/2511.01022
OA Status: green
OpenAlex ID: https://openalex.org/W4416434685

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DOI: https://doi.org/10.48550/arxiv.2511.01022

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Title: On Structural Properties of Risk-Averse Optimal Stopping Problems

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Type: preprint

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Publication year: 2025

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Publication date: 2025-11-02

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Authors: Steven I. Marcus

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Landing page: https://arxiv.org/abs/2511.01022

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PDF URL: https://arxiv.org/pdf/2511.01022

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Cited by: 0

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