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A class of recursive optimal stopping problems with applications to stock trading

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  • Katia Colaneri
  • Tiziano De Angelis

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 multi-dimensional 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.

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  • Katia Colaneri & Tiziano De Angelis, 2019. "A class of recursive optimal stopping problems with applications to stock trading," Papers 1905.02650, arXiv.org, revised Jun 2021.
    • Handle: RePEc:arx:papers:1905.02650
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    References listed on IDEAS

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