A free boundary problem arising from a multi-state regime-switching stock trading model
Analysis of PDEs
2020-08-18 v1 Mathematical Finance
Risk Management
Abstract
In this paper, we study a free boundary problem, which arises from an optimal trading problem of a stock that is driven by a uncertain market status process. The free boundary problem is a variational inequality system of three functions with a degenerate operator. The main contribution of this paper is that we not only prove all the four switching free boundaries are no-overlapping, monotonic and -smooth, but also completely determine their relative localities and provide the optimal trading strategies for the stock trading problem.
Cite
@article{arxiv.2008.07082,
title = {A free boundary problem arising from a multi-state regime-switching stock trading model},
author = {Chonghu Guan and Jing Peng and Zuo Quan Xu},
journal= {arXiv preprint arXiv:2008.07082},
year = {2020}
}