This article analyzes the trade-off between ÏcautionÓ and ÏintensityÓ in the use of the control variable in a one-state one-control dynamic stochastic quadratic linear optimization problem with discount factor. It studies the effects that changes in uncertainty of the control parameter have...

Since 1973 currency market has been dominated by US-Dollar cycles, the so called long swings. The long swinging behaviour of the dollar has been confirmed also by its strong depreciation against the Euro, registered in the last three years. Periods of steady appreciation followed by period of...

In this essay, it is shown that in the Hoel and Karp (2001) model of global warming, the optimal response of taxes for a stock pollutant with mutiplicative uncertainty is opposite when the control variable is pollution taxes instead of emissions. In this case, the election of control variable...

Consider a firm with an arbitrary profit function whose relative price follows a Brownian motion with negative drift. When the firm faces a fixed cost of price adjustment, we prove the optimal pricing policy is a control band if the following sufficient conditions are met: the profit function is...

Many problems in modern financial economics involve the solution of continuous-time, continuous-state stochastic control problems. Since explicit solutions of such problems are extremely rare, efficient numerical methods are called for. The Markov chain approximation approach provides a class of...

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...