EconPapers    
Economics at your fingertips  
 

An Optimal Stopping Problem of Detecting Entry Points for Trading Modeled by Geometric Brownian Motion

Yue Liu, Aijun Yang (), Jijian Zhang and Jingjing Yao
Additional contact information
Yue Liu: Jiangsu University
Aijun Yang: Nanjing Forestry University
Jijian Zhang: Jiangsu University
Jingjing Yao: Jiangsu University

Computational Economics, 2020, vol. 55, issue 3, No 4, 827-843

Abstract: Abstract A “buy low, sell high” trading practice is modeled as an optimal stopping problem in this paper. Because its award function lacks sufficient smoothness, traditional free-boundary approach with solution in form of integral equations is not available. Therefore, we design a backward recursive algorithm computing the value function to determine the stopping boundary. Besides, a new PDE technique is developed to conclude the special cases with positive drift. Finally, groups of comparison tests are designed to investigate the model parameters setting as well as the feasibility and profitability of the trading strategy.

Keywords: Optimal stopping problem; Trading strategy; Geometric Brownian motion (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s10614-019-09915-w Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:compec:v:55:y:2020:i:3:d:10.1007_s10614-019-09915-w

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/10614/PS2

DOI: 10.1007/s10614-019-09915-w

Access Statistics for this article

Computational Economics is currently edited by Hans Amman

More articles in Computational Economics from Springer, Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2022-05-12
Handle: RePEc:kap:compec:v:55:y:2020:i:3:d:10.1007_s10614-019-09915-w