Optimal stopping in a large financial network model

We shall consider and characterize an optimal stopping problem of a nonlinear diffusion for a node directly coupled with a neighboring node and the empirical measure of the nodes in a large financial network. We start with a... [ view full abstract ]

We shall consider and characterize an optimal stopping problem of a nonlinear diffusion for a node directly coupled with a neighboring node and the empirical measure of the nodes in a large financial network. We start with a finite system of linear stochastic equations for the nodes in the network and study its limits, as we let the number of nodes go to infinity. Then we propose a simple optimal stopping problem for the limiting system and analyze it via the method of backward stochastic differential equation.