A class of Solvable Multiple Entry Problems with Forced Exits
Abstract
We study an optimal investment problem with multiple entries and forced exits. A closed form solution of the optimisation problem is presented for general underlying diffusion dynamics and a general running payoff function in the case when forced exits occur on the jump times of a Poisson process. Furthermore, we allow the investment opportunity to be subject to the risk of a catastrophe that can occur at the jumps of the Poisson process. More precisely, we attach IID Bernoulli trials to the jump times and if the trial fails, no further re-entries are allowed. We show in the general case that the optimal investment threshold is independent of the success probability is the Bernoulli trials. The results are illustrated with explicit examples.
Keywords
Cite
@article{arxiv.1610.02877,
title = {A class of Solvable Multiple Entry Problems with Forced Exits},
author = {Jukka Lempa},
journal= {arXiv preprint arXiv:1610.02877},
year = {2016}
}