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Article

Optimal Stopping Methods for Investment Decisions: A Literature Review

by
Zhenya Liu
1,2,3,* and
Yuhao Mu
1
1
School of Finance, Renmin University of China, Beijing 100872, China
2
China Financial Policy Research Center, Renmin University of China, Beijing 100872, China
3
CERGAM, Aix-Marseille University, CEDEX 07, 13284 Aix-en-Provence, France
*
Author to whom correspondence should be addressed.
Int. J. Financ. Stud. 2022, 10(4), 96; https://doi.org/10.3390/ijfs10040096
Submission received: 31 August 2022 / Revised: 29 September 2022 / Accepted: 9 October 2022 / Published: 13 October 2022
Review Reports Versions Notes

Abstract

Investors decide the best time to take a given action by maximizing their utility function while taking into account current information and the underlying process in the optimal stopping model. Option pricing, sequential analysis, disorder problems, and other problems requiring time decision-making are all examples of this type of problem. A lot of literature has studied optimal stopping models and put forward the corresponding solutions. Investors in financial markets must also know when to buy and sell, so timing is crucial. This paper presents a classified review of the literature on optimal stopping models, followed by a summary of the strategies that can be used in financial markets to make investment decisions using optimal stopping methods.
Keywords: optimal stopping; sequential analysis; disorder problem; regime-switching optimal stopping; sequential analysis; disorder problem; regime-switching

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MDPI and ACS Style

Liu, Z.; Mu, Y. Optimal Stopping Methods for Investment Decisions: A Literature Review. Int. J. Financ. Stud. 2022, 10, 96. https://doi.org/10.3390/ijfs10040096

AMA Style

Liu Z, Mu Y. Optimal Stopping Methods for Investment Decisions: A Literature Review. International Journal of Financial Studies. 2022; 10(4):96. https://doi.org/10.3390/ijfs10040096

Chicago/Turabian Style

Liu, Zhenya, and Yuhao Mu. 2022. "Optimal Stopping Methods for Investment Decisions: A Literature Review" International Journal of Financial Studies 10, no. 4: 96. https://doi.org/10.3390/ijfs10040096

APA Style

Liu, Z., & Mu, Y. (2022). Optimal Stopping Methods for Investment Decisions: A Literature Review. International Journal of Financial Studies, 10(4), 96. https://doi.org/10.3390/ijfs10040096

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