Related papers: Deterministic Income with Deterministic and Stocha…
An efficient method to price bonds with optional sinking feature is presented. Such instruments equip their issuer with the option (but not the obligation) to redeem parts of the notional prior to maturity, therefore the future cash flows…
We investigate an optimal reinsurance problem for an insurance company facing a constant fixed cost when the reinsurance contract is signed. The insurer needs to optimally choose both the starting time of the reinsurance contract and the…
Mathematically, the execution of an American-style financial derivative is commonly reduced to solving an optimal stopping problem. Breaking the general assumption that the knowledge of the holder is restricted to the price history of the…
The design and pricing of services are two of the most important decisions faced by any intermodal transport operator. The key success factor lies in the ability of meeting the needs of the shippers. Therefore, making full use of the…
We consider a problem of an optimal consumption strategy on the infinite time horizon when the short-rate is a diffusion process. General existence and uniqueness theorem is illustrated by the Vasicek and so-called invariant interval…
In this paper, we study a class of one-dimensional stochastic differential equations driven by fractional Brownian motion with Hurst parameter $H>\ff 1 2$. The drift term of the equation is locally Lipschitz and unbounded in the…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
This paper tackles challenges in pricing and revenue projections due to consumer uncertainty. We propose a novel data-based approach for firms facing unknown consumer type distributions. Unlike existing methods, we assume firms only observe…
Deterministic auctions are attractive in practice due to their transparency, simplicity, and ease of implementation, motivating a sharper understanding of when they can attain the same outcomes as randomized mechanisms. We study…
A new multi-factor short rate model is presented which is bounded from below by a real-valued function of time. The mean-reverting short rate process is modeled by a sum of pure-jump Ornstein--Uhlenbeck processes such that the related bond…
The standard Hotelling model assumes that the stock of an exhaustible resource is known. We expand on the model by Arrow and Chang that introduced stochastic discoveries and for the first time completely solve such a model using impulse…
The Ornstein-Uhlenbeck process is interpreted as Brownian motion in a harmonic potential. This Gaussian Markov process has a bounded variance and admits a stationary probability distribution, in contrast to the standard Brownian motion. It…
We investigate the problem of optimal dividend distribution for a company in the presence of regime shifts. We consider a company whose cumulative net revenues evolve as a Brownian motion with positive drift that is modulated by a finite…
We investigate propagation of convexity and convex ordering on a typical discrete-time stochastic optimal control problem, namely the pricing of swing option. The dynamics of the underlying asset is modelled by the Euler scheme of a…
In this paper, we consider the classic stochastic (dynamic) knapsack problem, a fundamental mathematical model in revenue management, with general time-varying random demand. Our main goal is to study the optimal policies, which can be…
In an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of…
Evaluating the financial performance of manufacturing firms requires consideration of both the time value of money and the relative importance of multiple decision criteria. Conventional approaches relying solely on deterministic…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
Empirical research often cites observed choice responses to variation that shifts expected discounted future utilities, but not current utilities, as an intuitive source of information on time preferences. We study the identification of…
There is a growing body of work on sorting and selection in models other than the unit-cost comparison model. This work is the first treatment of a natural stochastic variant of the problem where the cost of comparing two elements is a…