On stop-loss strategies for stock investments.
type: Item
instance of: scholarly article
title: On stop-loss strategies for stock investments.
zbMATH Open document ID: 1048.91069
DOI: 10.1016/S0096-3003(99)00229-5
author: Shih-yu Shen
author: Andrew Minglong Wang
published in: Applied Mathematics and Computation
publication date: 2003-01-28T00:00:00Z
review text: This paper deals with the expected return of a stock investment with a stop-loss strategy. For the probability density for the transformed price \(x=\ln s\), \(u(t,x)\) a convection-diffusion equation \[ u_{t}(x,t)={\sigma^2\over 2}u_{xx}(x,t)-\eta u_{x}(x,t) \] with conditions \(u(l(t),t)=0\), \(u(x,0)=\delta(x-x_0)\) is derived, where \(l(t)=\ln(s(t))\), \(s(t)\) is a stock price-per-share, \(\delta(x)\) is a Dirac delta function. The expected value of the investment is evaluated. When the stop-loss criterion is a linear function of time, the exact form for the probability density function is available. Results for two examples with an exact probability density function are presented. The authors design a boundary element method to solve the boundary value problem for a general stop-loss criterion.
Mathematics Subject Classification ID: 91B28
zbMATH DE Number: 1860860
zbMATH Keywords: boundary value problem
zbMATH Keywords: convection-diffusion equation
zbMATH Keywords: boundary element method
reviewed by: Aleksandr D. Borisenko
MaRDI profile type: Publication
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Wikidata QID: Q127186446
description: scientific article; zbMATH DE number 1860860