Multidimensional investment problem

A1 Journal article (refereed)


Internal Authors/Editors


Publication Details

List of Authors: Sören Christensen, Paavo Salminen
Publication year: 2018
Journal: Mathematics and Financial Economics
Volume number: 12
Issue number: 1
Start page: 75
End page: 95
eISSN: 1862-9660


Abstract

In this paper we demonstrate that {the Riesz representation of excessive functions is a useful and enlightening tool to study optimal stopping problems. After a short general discussion of the Riesz representation we concretize to geometric Brownian motions. After this, a classical investment problem, also known as exchange-of-baskets-problem, is studied. It is seen that the boundary of the stopping region in this problem can be characterized as a unique solution of an integral equation arising immediately from the Riesz representation of the value function. The two-dimensional case is studied in more detail and a numerical algorithm is presented.



Last updated on 2020-28-02 at 04:04