Figure - available from: Annals of Operations Research
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With the application of the optimal stopping techniques, this paper proposes a filter rule for investors in emerging stock markets. In a bull market, once the stock price falls down to the optimal filter size, investors should sell the stock to avoid massive losses. We show that the optimal filter size is a function of the historical highest price,...
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Predicting stock movements is a valuable research field that can help investors earn more profits. As with time-series data, the stock market is time-dependent and the value of historical information may decrease over time. Accurate prediction can be achieved by mining valuable information with words on social platforms and further integrating it w...
Citations
... Practically, a strand of literature applies the optimal stopping method to the financial markets and evaluate how the optimal stopping strategies perform. Boubaker et al. (2021) incorporate the maximum drawdown into the objective function, and investors weigh the trade-off between tolerating the current drawdown in the hope of a new high price level and selling immediately: ...
... The optimal prediction method is adopted in Boubaker et al. (2021) to carry out risk management of crude oil futures, and the two periods of sharp rise and fall of crude oil market from January 2007 to December 2008 and from February 2009 to October 2011 are selected. Although the selling time suggested by the optimal prediction method lags behind the peak of the price, it can effectively reduce losses. ...
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.
