A general framework for pricing of real options in continuous time for wide classes of payoff streams that are monotone functions of a Levy process is provided. Exercise rules are formulated in terms of statistics of record-setting low payoffs and can be viewed as an extension of Bernanke's bad...

We explicitly solve the pricing problem for perpetual American puts and calls, and provide an efficient semi-explicit pricing procedure for options with finite time horizon. Contrary to the standard approach, which uses the price process as a primitive, we model the price process as the expected...

Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when options are simple and the price of an underlying asset follows a geometric Brownian motion. This paper suggests a general, computationally simple approach to real options in discrete...

The real options approach is used to explain discounted utility anomalies as artifacts of the optimizing behavior of an individual with standard preferences, who perceives the utility from consumption in the future as uncertain. For this ndividual, waiting is valuable because uncertainty is...

We explain essentially all known discounted utility anomalies as artefacts of the optimizing behavior of an individual with a time- separable utility function, who perceives a good as a source of a stochastic consumption stream, and believes that she can wait for an optimal moment to buy or sell...

We analyze the endogenous appearance of money substitutes, their interaction with outside money, and resulting distortions in the price system of an economy with large monopolies and wide-spread informal networks. The economy consists of productive, individually optimizing agents and less...