Financial Engineering Seminar
April, 2, 2004(Fri), 3:00pm
3:00 PM - 3:50 PM(8th period),
Place: FLG 220
Corrected Random Walk Approximations to Free Boundary Problems in
Optimal Stopping:
Theory and Applications
Abstract:
Optimal stopping problems for Brownian motion can be characterized as
free boundary problems
for which analytical and computational methods have been devised. Among
the latter are random walk
based approximations and the purpose of this talk is to illustrate the
interplay between continuous and
discrete models. In particular, I will discuss how renewal theory and a
decomposition formula
originally developed in the context of option pricing can be used to
derive error terms for the
above approximations. Detailed examples drawn from efficient option
pricing and singular stochastic control will be provided
Downloads:
slides.pdf
plot.pdf