This paper demonstrates how risk control as applied to popular investment products can be based on a fallacy. In scope are option-based capital protected products and rules-based portfolio insurance products. In case of structured products risk control shifts the option¡¯s volatility risk from...

We consider a general real option model which allows finite values for all parameters influencing the value of waiting in case of uncertain and irreversible investment. We show that the traditional net present value rule and the commonly known Dixit-Pindyck approach are nested in the same...

The European Commission recently published legislative proposals to reform the Markets In Financial Instruments Directive (MiFID). This note elaborates on the proposed shift in classification of “structured Undertakings for Collective Investment in Transferable Securities (UCITS)”. While...

The valuation of multi-staged pharmaceutical R&D can be interpreted as a chain of real options. In valuing these compound option models, a crucial problem is how to deal with the different types of risk. Previous models, such as Cassimon et al. (2004), offer a closed-form solution for the...