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General option exercise rules, with applications to embedded options and monopolistic expansion

Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2005

technology, the other - demand uncertainty. The impact of these factors on new technology adoption is analyzed. It is shown that … depending on the situation and type of uncertainty, the diffusion uncertainty and jump uncertainty can produce opposite effects. …

Persistent link: https://www.econbiz.de/10005076973

Optimal stopping made easy

Boyarchenko, Svetlana; Levendorskiy, Sergey - EconWPA - 2004

the underlying uncertainty is modelled as a random walk on a lattice. The method of the paper is based on the use of the …

Persistent link: https://www.econbiz.de/10005134695

Real options and the universal bad news principle

Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2004

incorporates non-technological uncertainty. The former factor follows a process with upward jumps. The impact of these factors on …

Persistent link: https://www.econbiz.de/10005134751

American options: the EPV pricing model

Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2004

We explicitly solve the pricing problem for perpetual American puts and calls, and provide an efficient semi-explicit pricing procedure for options with finite time horizon. Contrary to the standard approach, which uses the price process as a primitive, we model the price process as the expected...

Persistent link: https://www.econbiz.de/10005134771

Practical guide to real options in discrete time

Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2004

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, computationally simple approach to real options in discrete...

Persistent link: https://www.econbiz.de/10005134883

Practical guide to real options in discrete time II

Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2005

This paper is an extended version of the paper 'Practical Guide to Real Options in Discrete Time' (http://econwpa.wustl.edu:80/eps/fin/papers/0405/0405016.pdf), where a general, computationally simple approach to real options in discrete time was suggested. We explicitly formulate conditions of...

Persistent link: https://www.econbiz.de/10005413111

Stochastic Dominance Efficiency Tests under Diversification

Kuosmanen, Timo - EconWPA - 2001

This paper focuses on Stochastic Dominance (SD) efficiency in a finite empirical panel data. We analytically characterize the sets of unsorted time series that dominate a given evaluated distribution by the First, Second, and Third order SD. Using these insights, we develop simple Linear...

Persistent link: https://www.econbiz.de/10005561692

American Option Pricing with Transaction Costs

Zakamouline, Valeri - EconWPA - 2003

In this paper we examine the problem of finding investors' reservation option prices and corresponding early exercise policies of American- style options in the market with proportional transaction costs using the utility based approach proposed by Davis and Zariphopoulou (1995). We present a...

Persistent link: https://www.econbiz.de/10005413059

“Winners take all competition”, creative destruction and stock market bubble

Boucher, Christophe - EconWPA - 2003

From the model of Hobijn and Jovanovic (2001), we modelize a technological shock with uncertainty. We assume that this … technological shock appears in the shape of new firms. Only a part of these firms will be productive. Uncertainty relates to the … identification of the viable firms. This uncertainty decreases with the time and the diffusion of fundamentalist information that …

Persistent link: https://www.econbiz.de/10005561579

Risk Measure Pricing and Hedging in Incomplete Markets

Xu, Mingxin - EconWPA - 2004

This article attempts to extend the complete market option pricing theory to incomplete markets. Instead of eliminating the risk by a perfect hedging portfolio, partial hedging will be adopted and some residual risk at expiration will be tolerated. The risk measure (or risk indifference) prices...

Persistent link: https://www.econbiz.de/10005134826