An Optimal Trading Rule Under a Switchable Mean-Reversion Model

作者：Nguyen Duy; Tie Jingzhi; Zhang Qing^*

来源：Journal of Optimization Theory and Applications, 2014, 161(1): 145-163.

DOI：10.1007/s10957-012-0260-x

• Mean-reverting process
• Optimal stopping
• Quasi-variational inequalities

This work provides an optimal trading rule that allows buying and selling an asset sequentially over time. The asset price follows a switchable mean-reversion model with a Markovian jump. Such a model can be applied to assets with a "staircase" price behavior and yet is simple enough to allow an analytic solution. The objective is to determine a sequence of trading times to maximize an overall return. The corresponding value functions are characterized by a set of quasi-variational inequalities. A closed-form solution is obtained under suitable conditions. The sequence of trading times can be given in terms of a set of threshold levels. Finally, numerical examples are given to demonstrate the results.

• 出版日期2014-4