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Title: Contraction Options and Optimal Multiple-Stopping in Spectrally Negative Lévy Models

This paper studies the optimal multiple-stopping problem arising in the context of the timing option to withdraw from a project in stages. The profits are driven by a general spectrally negative Lévy process. This allows the model to incorporate sudden declines of the project values, generalizing greatly the classical geometric Brownian motion model. We solve the one-stage case as well as the extension to the multiple-stage case. The optimal stopping times are of threshold-type and the value function admits an expression in terms of the scale function. A series of numerical experiments are conducted to verify the optimality and to evaluate the efficiency of the algorithm.
Authors:
 [1]
  1. Kansai University, Department of Mathematics, Faculty of Engineering Science (Japan)
Publication Date:
OSTI Identifier:
22469889
Resource Type:
Journal Article
Resource Relation:
Journal Name: Applied Mathematics and Optimization; Journal Volume: 72; Journal Issue: 1; Other Information: Copyright (c) 2015 Springer Science+Business Media New York; http://www.springer-ny.com; Country of input: International Atomic Energy Agency (IAEA)
Country of Publication:
United States
Language:
English
Subject:
71 CLASSICAL AND QUANTUM MECHANICS, GENERAL PHYSICS; 97 MATHEMATICAL METHODS AND COMPUTING; ALGORITHMS; BROWNIAN MOVEMENT; CONTRACTION; EFFICIENCY; FUNCTIONS; MATHEMATICAL MODELS; MATHEMATICAL SOLUTIONS