This paper studies the valuation of real options when the cost of investment jumps at a random time. Three valuation formulas are derived. The first expresses the value of the project in terms of a collection of knockout barrier claims. The second identifies the premium relative to a project...

We use probabilistic methods to characterise the optimal exercise region of a swing option with put payoff, $n\ge 2$ exercise rights and finite maturity, when the underlying asset's dynamics is specified according to the Black & Scholes model. The optimal exercise region of each right (except...

We derive a simple integral equation for the default probability over a finite time horizon of a company that makes coupon payments on its debt and infrequently returns to its leverage target by increasing its debt unless it defaults on its debt. Compared to the conventional (constant default...

We examine the decision problem of a power producer contemplating an upgrade of its current generation capacity based on a fossil fuel technology (gas plant), when price processes have affine drift and differentiable volatility functions. The operator can choose the best of four mutually...

We show that the interplay between endogenous limited participation and credit lines creates asset price bubbles in a simple exchange economy with three types of agents: regular stockholders, arbitrageurs and liquidity providers. Regular stockholders are worse off in the economy with credit...

In district energy systems powered by Combined Heat and Power (CHP) plants, thermal storage can significantly increase CHP flexibility to respond to real time market signals and therefore improve the business case of such demand response schemes in a Smart Grid environment. However, main...