Scandinavian Working Papers in Economics
Working Paper Series,
Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance
No 18/2: Optimal Stopping of a Killed Exponentially Growing Process
Fredrik Armerin ()
Additional contact information
Fredrik Armerin: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: , Brinellvägen 1, 100 44 Stockholm, Sweden
Abstract: We consider a finite horizon optimal stopping problem. The value of the underlying process grows exponentially until a Poisson process jumps for the first time, at which the processes jumps to zero and stays there forever. As applications of this model we consider valuing real options and options written on the stock of a start-up company.
Keywords: Optimal stopping; Poisson processes; American options
JEL-codes: C61
12 pages, May 30, 2018
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