Abstract
In trading stocks investors naturally aspire to “buy low and sell high (BLSH)”. This paper formalizes the notion of BLSH by formulating stock buying/selling in terms of four optimal stopping problems involving the global maximum and minimum of the stock prices over a given investment horizon. Assuming that the stock price process follows a geometric Brownian motion, all the four problems are solved and buying/selling strategies completely characterized via a free-boundary PDE approach.
Min Dai is an affiliated member of Risk Management Institute of NUS.
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© 2010 Springer-Verlag Berlin Heidelberg
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Dai, M., Jin, H., Zhong, Y., Zhou, X.Y. (2010). Buy Low and Sell High. In: Chiarella, C., Novikov, A. (eds) Contemporary Quantitative Finance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-03479-4_16
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DOI: https://doi.org/10.1007/978-3-642-03479-4_16
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-03478-7
Online ISBN: 978-3-642-03479-4
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