The University of Liverpool
Department of Mathematical Sciences
Division of Statistics and Probability
SEMINAR
An optimal stopping problem with applications to the timing of investment
decisions
Mihail Zervos, Kings College, London
Wednesday, 2nd November 2005, 2pm
The Whittaker Room (211)
Abstract:
We consider the discretionary stopping problem that aims at maximising a
performance criterion for a general one-dimensional positive Itô diffusion.
This optimal stopping problem has several applications in mathematical
finance and economics.
These include the pricing of perpetual American options as well as the
optimal timing to invest in a project or capitalising an asset, which are
fundamental issues in the theory of real options. We develop a set of
sufficient conditions on the problem's data under which this optimal
stopping problem admits a solution that conforms with standard financial
and economic intuition.
Our analysis leads to results of an explicit analytic nature and is
illustrated by a number of special cases that are of interest in
applications, and aspects of which have been considered in the literature.
In the course of our analysis we also establish a range of results that can
provide useful tools for developing the solution of other stochastic
control problems..
Following the talk, tea and biscuits will be available in Room 304
ALL WELCOME
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Ingrid Harper
University of Liverpool
Department of Mathematical Sciences
Division of Statistics and Probability
Mathematical Sciences Building
Peach Street
Liverpool L69 7ZL
Tel: 0151 794 4751
Fax: 0151 794 4754
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