We study the impact of financial innovations on real investment decisions within the framework of an incomplete market economy comprised of firms, investors, and an intermediary. The firms face unique investment opportunities that arise in their business operations and can be undertaken at given...

This article investigates the role of option contracts in a supply chain when the demand curve is downward sloping. We consider call (put) options that provide the retailer with the right to reorder (return) goods at a fixed price. We show that the introduction of option contracts causes the...

This paper examines the use of options contracts by firms acquiring rights to commercialize university technologies. By combining information about the sequence of licensing decisions with characteristics of the firms and technologies involved, I explore factors that shape decisions to purchase...

This paper studies how judicious resource allocation in networks mitigates risk. Theory is presented for general utility functions and mean-variance formulations and is illustrated with networks featuring resource diversification, flexibility (e.g., inventory substitution), and sharing...

This paper surveys the underlying theory and practice in the use of options in support of emerging business-to-business (B2B) markets. Such options, on both capacity and output, play an important role in integrating long- and short-term contracting between multiple buyers and sellers in such...

This paper describes a practical algorithm based on Monte Carlo simulation for the pricing of multidimensional American (i.e., continuously exercisable) and Bermudan (i.e., discretely exercisable) options. The method generates both lower and upper bounds for the Bermudan option price and hence...

In contrast to previous efforts to model an individual's movement from wage work into entrepreneurship, we consider that individuals might transition incrementally by retaining their wage job while entering into self-employment. We show that these hybrid entrepreneurs represent a significant...

We provide a general valuation approach for capital budgeting decisions involving the modularization in the design of a system. Within the framework developed by Baldwin and Clark (Baldwin, C. Y., K. B. Clark. 2000. Design Rules: The Power of Modularity. MIT Press, Cambridge, MA), we implement a...

Managerial flexibility has value in the context of uncertain R...D projects, as management can repeatedly gather information about uncertain project and market characteristics and, based on this information, change its course of action. This value is now well accepted and referred to as "real...

This paper considers the so-called warehouse problem with both space and injection/withdrawal capacity limits. This is a foundational problem in the merchant management of assets for the storage of commodities, such as energy sources and natural resources. When the commodity spot price evolves...