Related papers: Real Options Technique as a Tool of Strategic Risk…
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…
The binomial tree method and the Monte Carlo (MC) method are popular methods for solving option pricing problems. However in both methods there is a trade-off between accuracy and speed of computation, both of which are important in…
The aim of this paper is to describe a new an integrated methodology for project control under uncertainty. This proposal is based on Earned Value Methodology and risk analysis and presents several refinements to previous methodologies.…
The standard approach for constructing a Mean-Variance portfolio involves estimating parameters for the model using collected samples. However, since the distribution of future data may not resemble that of the training set, the…
Value-at-risk (VaR) has been playing the role of a standard risk measure since its introduction. In practice, the delta-normal approach is usually adopted to approximate the VaR of portfolios with option positions. Its effectiveness,…
We explore credit risk pricing by modeling equity as a call option and debt as the difference between the firm's asset value and a put option, following the structural framework of the Merton model. Our approach proceeds in two stages:…
The project managers who deal with risk management are often faced with the difficult task of determining the relative importance of the various sources of risk that affect the project. This prioritisation is crucial to direct management…
Discrete choice models are commonly used by applied statisticians in numerous fields, such as marketing, economics, finance, and operations research. When agents in discrete choice models are assumed to have differing preferences, exact…
Risk management is very important for individual investors or companies. There are many ways to measure the risk of investment. Prices of risky assets vary rapidly and randomly due to the complexity of finance market. Random interval is a…
We introduce an ensemble learning method for dynamic portfolio valuation and risk management building on regression trees. We learn the dynamic value process of a derivative portfolio from a finite sample of its cumulative cash flow. The…
The paper considers an investment timing problem appearing in real options theory. Present values from an investment project are modeled by general diffusion process. We prove necessary and sufficient conditions under which an optimal…
The present article explores the application of randomized control techniques in empirical asset pricing and performance evaluation. It introduces geometric random walks, a class of Markov chain Monte Carlo methods, to construct flexible…
We apply a utility-based method to obtain the value of a finite-time investment opportunity when the underlying real asset is not perfectly correlated to a traded financial asset. Using a discrete-time algorithm to calculate the…
We present a computational method for measuring financial risk by estimating the Value at Risk and Expected Shortfall from financial series. We have made two assumptions: First, that the predictive distributions of the values of an asset…
The purpose of the study is to propose a methodology for evaluation and ranking of risky investment projects.An investment certainty equivalence approach dual to the conventional separation of riskless and risky contributions based on cash…
In many risk-aware and multi-objective reinforcement learning settings, the utility of the user is derived from the single execution of a policy. In these settings, making decisions based on the average future returns is not suitable. For…
In this work we are concerned with valuing optionalities associated to invest or to delay investment in a project when the available information provided to the manager comes from simulated data of cash flows under historical (or…
Barrier options are one of the most widely traded exotic options on stock exchanges. In this paper, we develop a new stochastic simulation method for pricing barrier options and estimating the corresponding execution probabilities. We show…
The tree-based ensembles are known for their outstanding performance in classification and regression problems characterized by feature vectors represented by mixed-type variables from various ranges and domains. However, considering…
In order to estimate the conditional risk of a portfolio's return, two strategies can be advocated. A multivariate strategy requires estimating a dynamic model for the vector of risk factors, which is often challenging, when at all…