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Optimal stopping of a killed exponentially growing process

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  • Armerin, F.

Abstract

We consider a finite horizon optimal stopping problem with a gain function equal to the call option’s. The value of the underlying process grows exponentially until a Poisson process jumps for the first time, at which the process jumps to zero and stays there forever. As applications of this model we consider valuing real options and options written on the stock of a start-up company.

Suggested Citation

  • Armerin, F., 2019. "Optimal stopping of a killed exponentially growing process," Applied Mathematics and Computation, Elsevier, vol. 353(C), pages 208-214.
    • Handle: RePEc:eee:apmaco:v:353:y:2019:i:c:p:208-214
    DOI: 10.1016/j.amc.2019.02.006
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    References listed on IDEAS

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    1. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    2. Reiss, Ariane, 1998. "Investment in Innovations and Competition: An Option Pricing Approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(3, Part 2), pages 635-650.
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