Buy Low and Sell High

Min Dai (), Hanqing Jin (), Yifei Zhong () and Xun Yu Zhou ()
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Min Dai: National University of Singapore (NUS), Department of Mathematics
Hanqing Jin: The University of Oxford, Mathematical Institute and Nomura Centre for Mathematical Finance, and Oxford-Man Institute of Quantitative Finance
Yifei Zhong: The University of Oxford, Mathematical Institute and Nomura Centre for Mathematical Finance, and Oxford-Man Institute of Quantitative Finance
Xun Yu Zhou: The University of Oxford, Mathematical Institute and Nomura Centre for Mathematical Finance, and Oxford-Man Institute of Quantitative Finance

A chapter in Contemporary Quantitative Finance, 2010, pp 317-333 from Springer

Abstract: Abstract In trading stocks investors naturally aspire to “buy low and sell high (BLSH)”. This paper formalizes the notion of BLSH by formulating stock buying/selling in terms of four optimal stopping problems involving the global maximum and minimum of the stock prices over a given investment horizon. Assuming that the stock price process follows a geometric Brownian motion, all the four problems are solved and buying/selling strategies completely characterized via a free-boundary PDE approach.

Keywords: Free Boundary; Stock Price; Geometric Brownian Motion; Investment Horizon; Strong Maximum Principle (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-03479-4_16

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DOI: 10.1007/978-3-642-03479-4_16

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