Optimal Multiple Stopping of Linear Diffusions

Authors:
René Carmona;Savas Dayanik
Affiliations:
Department of Operations Research and Financial Engineering, and the Bendheim Center for Finance, Princeton University, Princeton, New Jersey 08544;Department of Operations Research and Financial Engineering, and the Bendheim Center for Finance, Princeton University, Princeton, New Jersey 08544
Venue:
Mathematics of Operations Research
Year:
2008

Citing 0
Cited 5

Valuation of electricity swing options by multistage stochastic programming

Automatica (Journal of IFAC)
On the One-Dimensional Optimal Switching Problem

Mathematics of Operations Research
Prospect Theory, Liquidation, and the Disposition Effect

Management Science
Adaptive Sampling for Linear State Estimation

SIAM Journal on Control and Optimization
Primal and Dual Pricing of Multiple Exercise Options in Continuous Time

SIAM Journal on Financial Mathematics

Quantified Score

Hi-index	0.00

Visualization

Abstract

Motivated by the analysis of financial instruments with multiple exercise rights of American type and mean reverting underlyers, we formulate and solve the optimal multiple-stopping problem for a general linear regular diffusion process and a general reward function. Instead of relying on specific properties of geometric Brownian motion and call and put option payoffs as in most of the existing literature, we use general theory of optimal stopping for diffusions, and we illustrate the resulting optimal exercise policies by concrete examples and constructive recipes.