This paper shows that the presence of conditional staging in R&D (Research & Development) has a critical impact on portfolio risk, and changes diversification arguments when a portfolio is constructed. When R&D projects exhibit option-like characteristics, correlation between projects plays a...

We propose a methodology for computing single and multi-asset European option prices, and more generally expectations of scalar functions of (multivariate) random variables. This new approach combines the ability of Monte Carlo simulation to handle high-dimensional problems with the efficiency...

We investigate, if it pays off for a company to invest into complex swing option algorithms. We first introduce least squares Monte Carlo as a complex valuation algorithm and explain in detail how it works. Using a simulation study and two backtest scenarios we compare the output of this method...

In Monte Carlo simulation, Latin hypercube sampling (LHS) [McKay et al. (1979)] is a well-known variance reduction technique for vectors of independent random variables. The method presented here, Latin hypercube sampling with dependence (LHSD), extends LHS to vectors of dependent random...