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Optimal double stopping of a Brownian bridge

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  • Erik J. Baurdoux
  • Nan Chen
  • Budhi A. Surya
  • Kazutoshi Yamazaki

Abstract

We study optimal double stopping problems driven by a Brownian bridge. The objective is to maximize the expected spread between the payoffs achieved at the two stopping times. We study several cases where the solutions can be solved explicitly by strategies of threshold type.

Suggested Citation

  • Erik J. Baurdoux & Nan Chen & Budhi A. Surya & Kazutoshi Yamazaki, 2014. "Optimal double stopping of a Brownian bridge," Papers 1409.2226, arXiv.org, revised Dec 2014.
  • Handle: RePEc:arx:papers:1409.2226
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    File URL: http://arxiv.org/pdf/1409.2226
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    References listed on IDEAS

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    1. Marco Avellaneda & Michael Lipkin, 2003. "A market-induced mechanism for stock pinning," Quantitative Finance, Taylor & Francis Journals, vol. 3(6), pages 417-425.
    2. repec:wsi:ijtafx:v:18:y:2015:i:03:n:s021902491550020x is not listed on IDEAS
    3. Guillermo Gallego & Garrett van Ryzin, 1994. "Optimal Dynamic Pricing of Inventories with Stochastic Demand over Finite Horizons," Management Science, INFORMS, vol. 40(8), pages 999-1020, August.
    4. Tim Leung & Xin Li, 2015. "Optimal Mean Reversion Trading With Transaction Costs And Stop-Loss Exit," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 18(03), pages 1-31.
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