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arXiv · 1407.6860

On the optimal exercise boundaries of swing put options

Tiziano De Angelis·Yerkin Kitapbayev
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Abstract

We use probabilistic methods to characterise time dependent optimal stopping boundaries in a problem of multiple optimal stopping on a finite time horizon. Motivated by financial applications we consider a payoff of immediate stopping of "put" type and the underlying dynamics follows a geometric Brownian motion. The optimal stopping region relative to each optimal stopping time is described in terms of two boundaries which are continuous, monotonic functions of time and uniquely solve a system of coupled integral equations of Volterra-type. Finally we provide a formula for the value function of the problem.

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Tiziano De Angelis, Yerkin Kitapbayev. 2017-01-08. On the optimal exercise boundaries of swing put options. https://arxiv.org/abs/1407.6860

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