A Markov-Modulated Stochastic Control Problem with Optimal Multiple Stopping with Application to Finance

This paper studies the valuation of multiple American options in an incomplete market where asset prices follow Markov-modulated dynamics. The holder's optimal hedging and exercising strategies are determined from a utility maximization problem with optimal multiple stopping. We analyze the associated system of variational inequalities for the holder's utility indifference price, and construct a duality formula involving relative entropy minimization over a random horizon

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Year of publication:	2015
Authors:	Leung, Tim
Publisher:	[2015]: [S.l.] : SSRN
Subject:	Kontrolltheorie \| Control theory \| Stochastischer Prozess \| Stochastic process \| Portfolio-Management \| Portfolio selection \| Finanzmarkt \| Financial market \| Mathematische Optimierung \| Mathematical programming \| Suchtheorie \| Search theory