Multidimensional investment problem

Sören Christensen, Paavo Salminen

    Research output: Contribution to journalArticleScientificpeer-review

    5 Citations (Scopus)

    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.

    Original languageUndefined/Unknown
    Pages (from-to)75–95
    JournalMathematics and Financial Economics
    Volume12
    Issue number1
    DOIs
    Publication statusPublished - 2018
    MoE publication typeA1 Journal article-refereed

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