In this article, a general form of optimal stopping problems in regime-switching models is studied under certain standard assumptions. An optimal stopping problem with an arbitrary value function in two-regime environment can be reduced to an optimal stopping problem without regime switching. A method of how to find optimal stopping rules is proposed using the techniques available for non-switching problems. In contrast to other methods, verification of optimality for the resulting value function is not necessary. In the end, we discuss a problem which may not be dealt with by the conventional methods, demonstrating the computational simplicity of our approach.
↧