Title: Optimal Timing to Trade Along a Randomized Brownian Bridge,
Abstract: This paper studies an optimal trading problem that incorporates the trader's
market view on the terminal asset price distribution and uninformative noise
embedded in the asset price dynamics. We model the underlying asset price
evolution by an exponential randomized Brownian bridge (rBb) and consider
various prior distributions for the random endpoint. We solve for the optimal
strategies to sell a stock, call, or put, and analyze the associated delayed
liquidation premia. We solve for the optimal trading strategies numerically and
compare them across different prior beliefs. Among our results, we find that
disconnected continuation/exercise regions arise when the trader prescribe a
two-point discrete distribution and double exponential distribution.