Document Type

Article

Publication Date

2008

Publication Source

SIAM Journal on Applied Mathematics

Abstract

This paper develops optimal selling rules in asset trading using a regime-switching exponential Gaussian diffusion model. The optimization problem is solved by a combined approach of boundary value problems and probabilistic analysis. A system of linear differential equations with variable coefficients and two-point boundary conditions, satisfied by the objective function of the problem, is derived. The existence and uniqueness of the solution are proved. A closed-form solution in terms of Weber functions is obtained for one-dimensional cases. For m-dimensional cases, a stochastic recursive algorithm for numerically searching the optimal value is developed. Numerical results are reported.

Inclusive pages

810-829

ISBN/ISSN

0036-1399

Document Version

Published Version

Comments

This document is made available in compliance with the publisher's policy on self-archiving or with the express permission of the publisher. Permission documentation is on file.

Volume

69

Issue

3

Peer Reviewed

yes

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Mathematics Commons

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