In this thesis, we consider an optimal stopping problem interpreted as the task of valuating two so called real options written on an underlying asset following the dynamics of an observable geometric Brownian motion with non-observable drift; we have incomplete information. After exercising the first real option, however, the value of the underlying asset becomes observable with reduced noise; we obtain partial information. We then state some theoretical properties of the value function such as convexity and monotonicity. Furthermore, numerical solutions for the value functions are obtained by stating and solving a linear complementary problem. This is done in a Python implementation using the 2nd order backward differentiation formula and summation-by-parts operators for finite differences combined with an operator splitting method.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:uu-531219 |
| Date | January 2024 |
| Creators | Sätherblom, Eric Marco Raymond |
| Publisher | Uppsala universitet, Sannolikhetsteori och kombinatorik |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
| Relation | U.U.D.M. project report ; 2024:6 |
Page generated in 0.002 seconds