Optimal stopping
- If( 1 +r)^2 ξ 1 < 17 /16, that is ifξ 1 < 17 /64 you should continue.
Your expected gain is
(^1 +r)^2 E
max
17
64
,ξ 1
= 4
Z 17 / 64
0
17
64
dx+
Z 1
17 / 64
xdx
=
= 4
(^)
17
64
(^1 +r)^2 E
max
,ξ 1
0
dx+
Z 1
17 / 64
xdx
(^)
17
64