Trading in stock markets consists of three major steps: The timing to buy and sell is extremely crucial. A selling rule can be specified by two preselected levels: This paper is concerned with an optimal selling rule based on the model characterized by a number of geometric Brownian motions coupled by a finite-state Markov chain. Such a policy can be obtained by solving a set of two-point boundary value differential equations.
An optimal stock liquidation rule - IEEE Xplore Document
Moreover, the corresponding expected target period and probability of making money and that of losing money are derived. Analytic solutions are obtained in one- and two-dimensional cases. Finally, a numerical example is considered to demonstrate the effectiveness of our method.
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Keywords optimal selling rule , geometric Brownian motion , Markov switching , two-point boundary value problem. AMS Subject Headings 91B26 , 91B28 , 91B Society for Industrial and Applied Mathematics. Cited by Dynamic pricing with stochastic reference effects based on a finite memory window.
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Stock Trading: An Optimal Selling Rule | SIAM Journal on Control and Optimization | Vol. 40, No. 1 | Society for Industrial and Applied Mathematics
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