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Discounted optimal stopping for maxima in diffusion models with finite horizon

Dublin Core		PKP Metadata Items	Metadata for this Document
1.	Title	Title of document	Discounted optimal stopping for maxima in diffusion models with finite horizon
2.	Creator	Author's name, affiliation, country	Pavel V. Gapeev; WIAS Berlin
3.	Subject	Discipline(s)
3.	Subject	Keyword(s)	Discounted optimal stopping problem; finite horizon; geometric Brownian motion; maximum process; parabolic free-boundary problem; smooth fit; normal reflection; a nonlinear Volterra integral equation of the second kind; boundary surface; a change-of-varia
3.	Subject	Subject classification	60G40; 35R35; 45G10; 60J60; 91B28
4.	Description	Abstract	We present a solution to some discounted optimal stopping problem for the maximum of a geometric Brownian motion on a finite time interval. The method of proof is based on reducing the initial optimal stopping problem with the continuation region determined by an increasing continuous boundary surface to a parabolic free-boundary problem. Using the change-of-variable formula with local time on surfaces we show that the optimal boundary can be characterized as a unique solution of a nonlinear integral equation. The result can be interpreted as pricing American fixed-strike lookback option in a diffusion model with finite time horizon.
5.	Publisher	Organizing agency, location
6.	Contributor	Sponsor(s)	This research was supported by Deutsche Forschungsgemeinschaft through the SFB 649 Economic Risk.
7.	Date	(YYYY-MM-DD)	2006-11-21
8.	Type	Status & genre	Peer-reviewed Article
8.	Type	Type
9.	Format	File format	PDF
10.	Identifier	Uniform Resource Identifier	http://ejp.ejpecp.org/article/view/367
10.	Identifier	Digital Object Identifier	10.1214/EJP.v11-367
11.	Source	Journal/conference title; vol., no. (year)	Electronic Journal of Probability; Vol 11
12.	Language	English=en
14.	Coverage	Geo-spatial location, chronological period, research sample (gender, age, etc.)
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