A Recursive Algorithm for Selling at the Ultimate Maximum in Regime-Switching Models

作者：Liu, Yue; Privault, Nicolas^*

来源：Methodology and Computing in Applied Probability, 2018, 20(1): 369-384.

DOI：10.1007/s11009-017-9558-3

• Optimal stopping
• Markovian regime switching
• Non-monotone free boundary
• Recursive approximation

We propose a recursive algorithm for the numerical computation of the optimal value function inf(t <=tau <= T) E[sup(0 <= s <= T) Y-s/Y-tau vertical bar F-t] over the stopping times tau with respect to the filtration of a geometric Brownian motion Y-t with Markovian regime switching. This method allows us to determine the boundary functions of the optimal stopping set when no associated Volterra integral equation is available. It applies in particular when regime-switching drifts have mixed signs, in which case the boundary functions may not be monotone.

• 出版日期2018-3
• 单位南阳理工学院; 江苏大学