This paper introduces a new approach to understanding investment. The distinctive feature of our approach is that shocks to the economic fundamentals have both persistent and transitory components, and that firms must disentangle the persistent from the transitory shocks. The model generates...

We study several approximations for the LIBOR market models presented in Brace, Gatarek, Musiela (1997), Jamshidian (1997) and Schoenmakers, Coffey (1999). Special attention is payed to log-normal approximations and their simulation by using direct simulation methods for log-normal random...