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Math. Comput. Appl. 2017, 22(1), 1; doi:10.3390/mca22010001

Optimization of Setting Take-Profit Levels for Derivative Trading

1,3,†
,
2,†,* , 1,†,* , 1,†
and
4,†
1
College of Economics and Management, Nanjing Forestry University, Nanjing 210037, China
2
School of Finance and Economics, Jiangsu University, Zhenjiang 212013, China
3
School of Business, Jinling Institute of Technology, Nanjing 211169, China
4
School of Finance, Nanjing Audit University, Nanjing 211815, China
These authors contributed equally to this work.
*
Authors to whom correspondence should be addressed.
Academic Editor: Fazal M. Mahomed
Received: 11 September 2016 / Revised: 29 November 2016 / Accepted: 9 December 2016 / Published: 22 December 2016
View Full-Text   |   Download PDF [266 KB, uploaded 29 December 2016]

Abstract

This paper develops an optimal stopping rule by characterizing the take-profit level. The optimization problem is modeled by geometric Brownian motion with two switchable regimes and solved by stochastic calculation. A closed-form profitability function for the trading strategies is given, and based on which the optimal take-profit level is numerically achievable with small cost of computational complexity. View Full-Text
Keywords: Black-Scholes model; passage time; optimization Black-Scholes model; passage time; optimization
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Rui, X.; Liu, Y.; Yang, A.; Yang, H.; Zhang, C. Optimization of Setting Take-Profit Levels for Derivative Trading. Math. Comput. Appl. 2017, 22, 1.

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