Related papers: On the American swaption in the linear-rational fr…
In this paper we study a utility maximization problem with both optimal control and optimal stopping in a finite time horizon. The value function can be characterized by a variational equation that involves a free boundary problem of a…
Many discrete-time optimal stopping problems are known to have more tractable limit forms based on a planar Poisson process. Using this tool we find a solution to the optimal stopping problem for i.i.d. sequence of $n$ discrete uniform…
We study several optimal stopping problems that arise from trading a mean-reverting price spread over a finite horizon. Modeling the spread by the Ornstein-Uhlenbeck process, we analyze three different trading strategies: (i) the long-short…
Motivated by the industry practice of pairs trading, we study the optimal timing strategies for trading a mean-reverting price spread. An optimal double stopping problem is formulated to analyze the timing to start and subsequently…
The classical optimal trading problem is the closure of a position in an asset over a time interval; the trader maximizes an expected utility under the constraint that the position be fully closed by terminal time. Since the asset price is…
In this paper we consider stopping problems for continuous-time Markov chains under a general risk-sensitive optimization criterion for problems with finite and infinite time horizon. More precisely our aim is to maximize the certainty…
The optimal stopping problem is a category of decision problems with a specific constrained configuration. It is relevant to various real-world applications such as finance and management. To solve the optimal stopping problem,…
In this paper we show that the optimal exercise boundary / free boundary of the American put option pricing problem for jump diffusions is continuously differentiable (except at the maturity). This differentiability result has been…
We extend the QLBS model by reformulating via considering a large trader whose transactions leave a permanent impact on the evolution of the exchange rate process and therefore affect the price of contingent claims on such processes.…
We study a robust optimal stopping problem with respect to a set $\cP$ of mutually singular probabilities. This can be interpreted as a zero-sum controller-stopper game in which the stopper is trying to maximize its pay-off while an adverse…
We propose a scalable and theoretically grounded low-rank conditional expectation model for recursive Monte Carlo optimal stopping problems, in particular American option pricing. Our method reformulates the estimation of continuation…
Option price data are used as inputs for model calibration, risk-neutral density estimation and many other financial applications. The presence of arbitrage in option price data can lead to poor performance or even failure of these tasks,…
In this work, we develop a novel efficient quadrature and sparse grid based polynomial interpolation method to price American options with multiple underlying assets. The approach is based on first formulating the pricing of American…
A Line Replaceable Unit (LRU) is a collection of connected parts in a system that is replaced when any part of the LRU fails. Companies use LRUs as a mechanism to reduce downtime of systems following a failure. The design of LRUs determines…
Optimal stopping is the problem of determining when to stop a stochastic system in order to maximize reward, which is of practical importance in domains such as finance, operations management and healthcare. Existing methods for…
We analyze an optimal stopping problem with random maturity under a nonlinear expectation with respect to a weakly compact set of mutually singular probabilities $\mathcal{P}$. The maturity is specified as the hitting time to level $0$ of…
We study the optimal mechanism design problem faced by a market intermediary who makes revenue by connecting buyers and sellers. We first show that the optimal intermediation protocol has substantial structure: it is the solution to an…
In this paper, we investigate optimal stopping problems in a continuous-time framework where only a discrete set of stopping dates is admissible, corresponding to the Bermudan option, within the so-called exploratory formulation. We…
This study addresses the interpretable estimation of price bounds in the context of price optimization. In recent years, price-optimization methods have become indispensable for maximizing revenue and profits. However, effective application…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…