Stopping Levels for a spectrally negative Markov Additive process

Date

2023-12-01

Author

Çağlar, Mine
Vardar Acar, Ceren

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The optimal stopping problem for pricingRussian options in financerequires takingthesupremumof the discounted reward function overall finitestoppingtimes. Weassumethelogarithmof theasset priceisaspectrally negativeMarkov additive process with finitely many regimes. Thereward function is given by theexponential of therunningsupremumof the price process. Previous work on Russian optimalstopping problemsuggests that the optimalstoppingtimewould bean upcrossingtime of the drawdown at acertain level foreach regime. We derive explicit formulas for identifyingthestoppinglevelsand computingthecorrespondingvaluefunctions through arecursivealgorithm. A numerical is provided for findingthesestoppinglevelsand their valuefunctions.

URI

https://hdl.handle.net/11511/107337

Journal

Communications in Mathematics and Statistics

DOI

https://doi.org/10.1007/s40304-023-00385-z

Collections

Department of Statistics, Article

Citation Formats

M. Çağlar and C. Vardar Acar, “Stopping Levels for a spectrally negative Markov Additive process,” Communications in Mathematics and Statistics, vol. 1, no. 1, pp. 1–22, 2023, Accessed: 00, 2023. [Online]. Available: https://hdl.handle.net/11511/107337.