When to sell a Markov chain asset?

2013/09/28 by Qing Zhang, Zhang, Qing
Decision Sciences · Economics, Econometrics and Finance · Social Sciences · #FOS: Economics and business #FOS: Mathematics #Insurance, Mortality, Demography, Risk Management #Optimization and Control (math.OC) #Pricing of Securities (q-fin.PR) #Risk and Portfolio Optimization #Stochastic processes and financial applications

paper · pdf · doi:10.48550/arxiv.1309.7507

openalex publication_date 2013/09/28 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

This paper is concerned with an optimal stock selling rule under a Markov chain model. The objective is to find an optimal stopping time to sell the stock so as to maximize an expected return. Solutions to the associated variational inequalities are obtained. Closed-form solutions are given in terms of a set of threshold levels. Verification theorems are provided to justify their optimality. Finally, numerical examples are reported to illustrate the results.

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