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.
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 a two-regime environment can be reduced to a pair of optimal stopping problems without regime switching. A method for finding optimal stopping rules is proposed using the techniques available for non-switching problems. In contrast to other methods, our systematic solution procedure is more direct since we first obtain the explicit form of the value functions . In the end, we discuss a problem which may not be dealt with by the conventional methods, demonstrating the computational simplicity of our approach.
A
a
R
an optimal stopping problem
a pair of optimal stopping problems
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of how to find
for finding
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verification of optimality for the resulting value function is not necessary
our systematic solution procedure is more direct since we first obtain the explicit form of the value functions