The Generalized Shiryaev's Problem and Skorohod Embedding

TL;DR

This paper explores the connection between the Skorohod embedding problem and the Shiryaev inverse problem for Brownian motion, introducing randomization techniques to extend the class of target distributions and establish new analytical links.

Contribution

It introduces a randomized initial state approach to solve the inverse problem, extending the class of target distributions and connecting it with the Skorohod embedding problem.

Findings

Randomization makes the inverse problem analytically tractable.

Extended the class of target distributions for linear boundaries.

Established a new connection between the inverse problem and Skorohod embedding.

Abstract

In this paper we consider a connection between the famous Skorohod embedding problem and the Shiryaev inverse problem for the first hitting time distribution of a Brownian motion: given a probability distribution, $F$, find a boundary such that the first hitting time distribution is $F$. By randomizing the initial state of the process we show that the inverse problem becomes analytically tractable. The randomization of the initial state allows us to significantly extend the class of target distributions in the case of a linear boundary and moreover allows us to establish connection with the Skorohod embedding problem.