The Art of Smooth Pasting (Now published in Fundamentals of Pure and Applied Economics 55 (Harwood Academic Publishers GbmH, Poststr. 22, 7000 Chur, Switzerland), 1993. ISBN: 3-7186-5384-2, ISSN: 0191-1708.)

Avinash Dixit

STICERD - Theoretical Economics Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: Many recent stochastic dynamic models in economics and finance are based on the theory of Brownian motion and its control or regulation. A heuristic exposition of this theory is presented with emphasis given to Itô's Lemma, the calculation of expected values and the derivation of Smooth Pasting conditions for discrete stopping and resetting problems.

Date: 1992-11
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