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On a stochastic version of the trading rule “Buy and Hold”

Author

Listed:
  • Shiryaev Albert
  • Novikov Alexander A.

    (University of Technology Sydney, Department of Mathematical Sciences, NSW 2007, Australien)

Abstract

The paper deals with the problem of finding an optimal one-time rebalancing strategy assuming that in the Black–Scholes model the drift term of the stock may change its value spontaneously at some random non-observable (hidden) time. The problem is studied on a finite time interval under two criteria of optimality (logarithmic and linear). The methods of the paper are based on the results for the quickest detection of drift change for Brownian motion.

Suggested Citation

  • Shiryaev Albert & Novikov Alexander A., 2009. "On a stochastic version of the trading rule “Buy and Hold”," Statistics & Risk Modeling, De Gruyter, vol. 26(4), pages 289-302, July.
    • Handle: RePEc:bpj:strimo:v:26:y:2009:i:4:p:289-302:n:5
    DOI: 10.1524/stnd.2008.1025
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    References listed on IDEAS

    as
    1. Blanchet-Scalliet, Christophette & Diop, Awa & Gibson, Rajna & Talay, Denis & Tanre, Etienne, 2007. "Technical analysis compared to mathematical models based methods under parameters mis-specification," Journal of Banking & Finance, Elsevier, vol. 31(5), pages 1351-1373, May.
    2. Gapeev, P.V. & Peskir, G., 2006. "The Wiener disorder problem with finite horizon," Stochastic Processes and their Applications, Elsevier, vol. 116(12), pages 1770-1791, December.
    3. Albert Shiryaev & Zuoquan Xu & Xun Yu Zhou, 2008. "Thou shalt buy and hold," Quantitative Finance, Taylor & Francis Journals, vol. 8(8), pages 765-776.
    Full references (including those not matched with items on IDEAS)

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