A remark on optimal variance stopping problems

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5 Citazioni (Scopus)

Abstract

In an optimal variance stopping problem the goal is to determine the stopping time at which the variance of a sequentially observed stochastic process is maximized. A solution method for such a problem has been recently provided by Pedersen (2011). Using the methodology developed by Pedersen and Peskir (2012), our aim is to show that the solution to the initial problem can be equivalently obtained by constraining the variance stopping problem to the expected size of the stopped process and then by maximizing the solution to the latter problem over all the admissible constraints. An application to a diffusion process used for modeling the dynamics of interest rates illustrates the proposed technique.
Lingua originaleEnglish
pagine (da-a)1187-1194
Numero di pagine8
RivistaJournal of Applied Probability
Volume52
DOI
Stato di pubblicazionePubblicato - 2015

Keywords

  • Constrained and unconstrained variance optimal stopping problems
  • diffusion process
  • interest rate
  • nonlinear optimal stopping problem

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