The problem of optimal stopping to an absorbing boundary in a stochastic differential equation land more generally, in a stochastic series is studied. It is shown that a simple minded approach may lead to incorrect results and that some corrections are needed. An algorithm for the correction is introduced and compared to numerical simulations for some case examples. (C) 1999 Elsevier Science B.V.
Absorbing boundaries and optimal stopping in a stochastic differential equation
MANNELLA, RICCARDO
1999-01-01
Abstract
The problem of optimal stopping to an absorbing boundary in a stochastic differential equation land more generally, in a stochastic series is studied. It is shown that a simple minded approach may lead to incorrect results and that some corrections are needed. An algorithm for the correction is introduced and compared to numerical simulations for some case examples. (C) 1999 Elsevier Science B.V.File in questo prodotto:
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