In this paper, we introduce and solve a class of optimal stopping problems of recursive type. In particular, the stopping payoff depends directly on the value function of the problem itself. In a multidimensional Markovian setting, we show that the problem is well posed in the sense that the value is indeed the unique solution to a fixed point problem in a suitable space of continuous functions, and an optimal stopping time exists. We then apply our class of problems to a model for stock trading in two different market venues, and we determine the optimal stopping rule in that case.
Colaneri, K., De Angelis, T. (2022). A Class of recursive optimal stopping problems with applications to stock trading. MATHEMATICS OF OPERATIONS RESEARCH, 47(3), 1833-1861 [10.1287/moor.2021.1190].
A Class of recursive optimal stopping problems with applications to stock trading
Colaneri, Katia;
2022-01-01
Abstract
In this paper, we introduce and solve a class of optimal stopping problems of recursive type. In particular, the stopping payoff depends directly on the value function of the problem itself. In a multidimensional Markovian setting, we show that the problem is well posed in the sense that the value is indeed the unique solution to a fixed point problem in a suitable space of continuous functions, and an optimal stopping time exists. We then apply our class of problems to a model for stock trading in two different market venues, and we determine the optimal stopping rule in that case.File | Dimensione | Formato | |
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