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  • P-ISSN3059-0604
  • E-ISSN3059-1309
  • KCI

ISSN : 3059-0604

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Vol.18 No.2

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BUYING AND SELLING RULES FOR A SIMPLE TRANSACTION OF A MEAN-REVERTING ASSET

BUYING AND SELLING RULES FOR A SIMPLE TRANSACTION OF A MEAN-REVERTING ASSET

한국수학교육학회지시리즈B:순수및응용수학 / Journal of the Korean Society of Mathematical Education Series B: Theoretical Mathematics and Pedagogical Mathematics, (P)3059-0604; (E)3059-1309
2011, v.18 no.2, pp.129-139
https://doi.org/10.7468/jksmeb.2011.18.2.129
Shin, Dong-Hoon (Institute for Quantitative Finance and Technology, Korea University)
Shin, Dong-Hoon. (2011). BUYING AND SELLING RULES FOR A SIMPLE TRANSACTION OF A MEAN-REVERTING ASSET. , 18(2), 129-139, https://doi.org/10.7468/jksmeb.2011.18.2.129

Abstract

We consider an optimal trading rule in this paper. We assume that the underlying asset follows a mean-reverting process and the transaction consists of one buying and one selling. To maximize the profit, we find price levels to buy low and to sell high. Associated HJB equations are used to formulate the value function. A verification theorem is provided for sufficient conditions. We conclude the paper with a numerical example.

keywords
mean-reversion, regime switching, optimal stopping

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한국수학교육학회지시리즈B:순수및응용수학

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