Maturity randomization for stochastic control problems

Bruno Bouchard, Nicole El Karoui, Nizar Touzi

Research output: Contribution to journalArticlepeer-review


We study a maturity randomization technique for approximating optimal control problems. The algorithm is based on a sequence of control problems with random terminal horizon which converges to the original one. This is a generalization of the so-called Canadization procedure suggested by Carr [Review of Financial Studies II (1998) 597-626] for the fast computation of American put option prices. In addition to the original application of this technique to optimal stopping problems, we provide an application to another problem in finance, namely the super-replication problem under stochastic volatility, and we show that the approximating value functions can be computed explicitly

Original languageEnglish (US)
Pages (from-to)2575-2605
Number of pages31
JournalAnnals of Applied Probability
Issue number4
StatePublished - Nov 2005


  • Optimal stopping
  • Stochastic control
  • Uncertain volatility models

ASJC Scopus subject areas

  • Statistics and Probability
  • Statistics, Probability and Uncertainty


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