Related papers: Real Options and Threshold Strategies
We study optimal stopping problems related to the pricing of perpetual American options in an extension of the Black-Merton-Scholes model in which the dividend and volatility rates of the underlying risky asset depend on the running values…
We study an optimal investment problem with multiple entries and forced exits. A closed form solution of the optimisation problem is presented for general underlying diffusion dynamics and a general running payoff function in the case when…
We study perpetual American option pricing problems in an extension of the Black-Merton-Scholes model in which the dividend and volatility rates of the underlying risky asset depend on the running values of its maximum and maximum drawdown.…
We study optimal investment problem for a diffusion market consisting of a finite number of risky assets (for example, bonds, stocks and options). Risky assets evolution is described by Ito's equation, and the number of risky assets can be…
Reinforcement learning can greatly benefit from the use of options as a way of encoding recurring behaviours and to foster exploration. An important open problem is how can an agent autonomously learn useful options when solving particular…
We present a methodology for obtaining explicit solutions to infinite time horizon optimal stopping problems involving general, one-dimensional, It\^o diffusions, payoff functions that need not be smooth and state-dependent discounting.…
In this paper, we investigate an interesting and important stopping problem mixed with stochastic controls and a \textit{nonsmooth} utility over a finite time horizon. The paper aims to develop new methodologies, which are significantly…
A class of optimal control problems governed by linear fractional diffusion equation with control constraint is considered. We first establish some results on the existence of strong solution to the state equation and the existence of…
We study the optimal timing of derivative purchases in incomplete markets. In our model, an investor attempts to maximize the spread between her model price and the offered market price through optimally timing her purchase. Both the…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
We introduce a general decision tree framework to value an option to invest/divest in a project, focusing on the model risk inherent in the assumptions made by standard real option valuation methods. We examine how real option values depend…
Deciding the best future execution time is a critical task in many business activities while evolving time series forecasting, and optimal timing strategy provides such a solution, which is driven by observed data. This solution has plenty…
We study optimal buying and selling strategies in target zone models. In these models the price is modeled by a diffusion process which is reflected at one or more barriers. Such models arise for example when a currency exchange rate is…
Any firm whose business strategy has an exposure constraint that limits its potential gain naturally considers expansion, as this can increase its exposure. We model business expansion as an enlargement of the opportunity set for business…
The scope of this paper is to study the optimal stopping problems associated to a stochastic process, which may represent the gain of an investment, for which information on the final value is available a priori. This information may…
This paper studies a {\it reversible} investment problem where a social planner aims to control its capacity production in order to fit optimally the random demand of a good. Our model allows for general diffusion dynamics on the demand as…
We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…
This paper studies an open question in the warehouse problem where a merchant trading a commodity tries to find an optimal inventory-trading policy to decide on purchase and sale quantities during a fixed time horizon in order to maximize…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when options are simple and the price of an underlying asset follows a geometric Brownian motion. This paper suggests a general,…