Financial/Actuarial Mathematics Seminar

Fall 2004: Thursdays 3:10-4:00, 3088 East Hall



Derivative valuation and investment management

Erhan Bayraktar

University of Michigan, Department of Mathematics

November 4, 2004



Abstract

A change in the arrival rate of a Poisson process delimits two different regimes in which one employs distinct strategies (e.g.,investment, advertising, manufacturing). The change time is unobservable and it is of interest to do an online detection. Here we solve the standard Poisson disorder problem which addresses the tradeoff between false alarms and detection delay costs and describe efficient numerical methods to calculate the optimal policy parameters.


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