A Class of Recursive Optimal Stopping Problems with Applications to Stock Trading

Katia Colaneri () and Tiziano De Angelis ()
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Katia Colaneri: Department of Economics and Finance, University of Rome Tor Vergata, 00133 Roma, Italy
Tiziano De Angelis: Department ESOMAS, University of Turin, 10134 Torino, Italy; Collegio Carlo Alberto, 10122 Torino, Italy

Mathematics of Operations Research, 2022, vol. 47, issue 3, 1833-1861

Abstract: In this paper, we introduce and solve a class of optimal stopping problems of recursive type. In particular, the stopping payoff depends directly on the value function of the problem itself. In a multidimensional Markovian setting, we show that the problem is well posed in the sense that the value is indeed the unique solution to a fixed point problem in a suitable space of continuous functions, and an optimal stopping time exists. We then apply our class of problems to a model for stock trading in two different market venues, and we determine the optimal stopping rule in that case.

Keywords: Primary: 60G40; 91G80, optimal stopping theory, recursive optimal stopping problems, stock selling (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormoor:v:47:y:2022:i:3:p:1833-1861

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