SIAM Journal on Applied Mathematics
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.
Eloe, Paul W.; Liu, R. H.; and Yatsuki, Masako, "Optimal selling rules in a regime-switching exponential Gaussian diffusion model" (2008). Mathematics Faculty Publications. 117.