1) Let U1, U2, ... be independent random variables, each uniformly distributed over the interval (0,...

1) Let U1, U2, ... be independent random variables, each uniformly distributed over the interval (0, 1]. These random variables represent successive bigs on an asset that you are trying to sell, and that you must sell by time = t, when the asset becomes worthless. As a strategy, you adopt a secret number \Theta and you will accept the first offer that's greater than \Theta . The offers arrive according to a Poisson process with rate \lambda = 1. For example, you accept the second offer if U1 <= \Theta and U2 > \Theta . What is the probability that you sell the asset by time = t? What value for \Theta maximizes your expected return?

2) Stochastic

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orchestra answered 1 year ago

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