We study the destabilizing effect of hedging strategies under Markovian dynamics with transaction costs. Once transaction costs are taken into account, continuous portfolio rehedging is no longer an optimal strategy. Using a non-optimizing (local in time) strategy for portfolio rebalancing,...

This paper develops a real option model in which the interaction between debt, liquidation policy and risky investments is studied. We consider a manager who owns the firm and faces the opportunity to invest in risky projects which may boost current profits at the cost of bankruptcy if they turn...

We introduce explicitly the effort as a choice variable in a continuous time utility maximisation framework of an executive who is partly compensated with stock options. We solve the model in the case where the executive is not allowed to trade in the company’s stock but is able to achieve a...

This paper develops a real option model in which the interaction between debt, liquidation policy and risky investments is studied. We consider a manager who owns the firm and faces the opportunity to invest in risky pro jects which may bo ost current profits at the cost of bankruptcy if they...

We study the destabilising effect of dynamic hedging strategies on the price of the underlying asset in the presence of transaction costs. Once transaction costs are taken into account, continuous portfolio re-hedging is no longer an optimal strategy. Using a non-optimising (local in time)...

This paper examines the trade-off shareholders face between providing managers with incentives to exert beneficial effort and to engage in costly fraudulent activity. We provide a solution to the optimal compensation problem, given that shareholders can either grant (restricted) stock or stock...

This paper investigates the effectiveness of development strategies for tourism destinations. We show that resource investments unambiguously increase tourism revenues and that increasing the degree of tourism sophistication, that is increasing the variety of tourism related goods and services,...

Self-Organised Criticality (SOC) is a concept developed over the last decade from dynamic systems analysis that aims to investigate the transition trajectories of evolutionary systems. The main emphasis in SOC is on the analysis of the impact of slow exogenous forces in combination with strong...