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Optimal liquidation of a call spread
Uppsala University, Disciplinary Domain of Science and Technology, Mathematics and Computer Science, Department of Mathematics, Analysis and Applied Mathematics.
Uppsala University, Disciplinary Domain of Science and Technology, Mathematics and Computer Science, Department of Mathematics.
2010 (English)In: Journal of Applied Probability, ISSN 0021-9002, E-ISSN 1475-6072, Vol. 47, no 2, 586-593 p.Article in journal (Refereed) Published
Abstract [en]

We study the optimal liquidation strategy for a call spread in the case when an investor, who does not hedge, believes in a volatility that differs from the implied volatility. The liquidation problem is formulated as an optimal stopping problem, which we solve explicitly. We also provide a sensitivity analysis with respect to the model parameters.

Place, publisher, year, edition, pages
2010. Vol. 47, no 2, 586-593 p.
Keyword [en]
Optimal stopping, call spread, Bachelier model
National Category
Mathematics
Identifiers
URN: urn:nbn:se:uu:diva-135818ISI: 000279511900019OAI: oai:DiVA.org:uu-135818DiVA: diva2:375805
Available from: 2010-12-09 Created: 2010-12-08 Last updated: 2017-12-11

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Ekström, Erik

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