Optimal Stopping of a Killed Exponentially Growing Process

Fredrik Armerin ()
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Fredrik Armerin: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: , Brinellvägen 1, 100 44 Stockholm, Sweden

No 18/2, Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

Abstract: We consider a finite horizon optimal stopping problem. The value of the underlying process grows exponentially until a Poisson process jumps for the first time, at which the processes jumps to zero and stays there forever. As applications of this model we consider valuing real options and options written on the stock of a start-up company.

Keywords: Optimal stopping; Poisson processes; American options (search for similar items in EconPapers)
JEL-codes: C61 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2018-05-30
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