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q-fin.MF2014
Optimal Starting-Stopping and Switching of a CIR Process with Fixed Costs
Tim Leung, Xin Li, Zheng Wang
This paper analyzes the problem of starting and stopping a Cox-Ingersoll-Ross (CIR) process with fixed costs. In addition, we also study a related optimal switching problem that in…
q-fin.TR2014
Optimal Mean Reversion Trading with Transaction Costs and Stop-Loss Exit
Tim Leung, Xin Li
Motivated by the industry practice of pairs trading, we study the optimal timing strategies for trading a mean-reverting price spread. An optimal double stopping problem is formula…